Proteins that contain a carboxyl‐terminal CaaX motif undergo post‐translational processing involving prenylation, endoproteolysis and methylesterification. Two yeast genes,AFC1andRCE1, which are candidates for genes encoding CaaX converting enzymes, were recently identified. Rce1p is required for the full penetrance of the activated Ras2pval19phenotype in yeast, indicating its possible utility as a new target in Ras‐based malignancies. Advances in our current understanding of CaaX convertases and the functional importance of CaaX proteolysis are discussed. Curr Opin Lipidol 9:99–102. © 1998 Rapid Science Ltd