Signal transduction in human neutrophils requires prenylcysteine-directed carboxyl methylation of ras-related low molecular weight GTP-binding proteins. We now report the subcellular localization and characterization of a neutrophil prenylcysteine alpha carboxyl methyltransferase. The highest carboxyl methyltransferase activity copurified with biotinylated neutrophil surface membranes, supporting a plasma membrane localization of the enzyme. Neutrophil nuclear fractions contained little or no methyltransferase activity. Methyltransferase activity was detergent-sensitive but could be reconstituted by removal of detergent in the presence of phosphatidyl choline and an anionic phospholipid. N-Acetyl-S-trans,trans-farnesyl-L-cysteine (AFC) and N-acetyl-S-all-trans-geranylgeranyl-L-cysteine (AGGC) were effective substrates for neutrophil prenylcysteine-directed methyltransferase; Vmax values for AFC and AGGC (16.4 and 22.1 pmol of methylated/mg protein/min, respectively) are among the highest yet reported. Although both GTP gamma S and the chemoattractant fMet-Leu-Phe stimulated methylation of ras-related proteins, neither affected methylation of AFC. These data suggest that neutrophil plasma membranes contain a phospholipid-dependent, prenylcysteine-directed carboxyl methyltransferase of relatively high specific activity that modifies ras-related protein substrates in the GTP-bound, activated state.