The alpha subunit of the heterotrimeric G protein G12, harboring a mutation in the GTP binding domain (Q229L), behaves as a potent oncogene in NIH 3T3 cells. This alpha subunit, like most other G protein alpha subunits, undergoes palmitoylation, the reversible posttranslational addition of palmitate to cysteine residues. We investigated the role of palmitoylation of alpha12 in membrane localization and transformation efficiency and whether another lipid modification, myristoylation, could substitute for palmitoylation. NIH 3T3 cells were stably transfected with plasmids that expressed the wild-type alpha12, the constitutively active Q229L (QL) mutant, and mutants in which C11 was changed to S (C11S) and S2 and R6 were changed to G and S, respectively (S2G). Incorporation of [3H]palmitate was found in the endogenous and expressed alpha12 but not in the C11S mutants. Incorporation of [3H]myristate was found only in the S2G mutants. The wild type, QL mutant, and all the acylation mutants were found in the particulate fraction. Cells expressing the nonpalmitoylated C11S,QL mutant did not undergo transformation. The S2G mutation in the nonpalmitoylated C11S,QL mutant restored the transformation efficiency to a greater level than that of the palmitoylated QL mutant as measured by foci formation, growth in soft agar, and growth rate. Palmitoylation was critical for the transformation efficiency of alpha12 but not specifically required because myristoylation could substitute for these functions.