Covalent modification by fatty acylation and prenylation occurs on a wide variety of cellular signalling proteins. The enzymes that catalyze attachment of these lipophilic moieties to proteins have recently been identified and characterized. Each lipophilic group confers unique properties to the modified protein, resulting in alterations in protein/protein interactions, membrane binding and targeting, and intracellular signalling. The biochemistry and cell biology of protein myristoylation, farnesylation and geranylgeranylation is reviewed here, with emphasis on the Src family of tyrosine kinases, Ras proteins and G protein coupled signalling systems.