In higher eukaryotes, the Ras and Raf-1 proto-oncoproteins transduce growth and differentiation signals initiated by tyrosine kinases. The Ras polypeptide and the amino-terminal regulatory domain of Raf-1 (residues 1-257) are shown to interact, directly in vitro and in a yeast expression system. Raf-1 (1-257) binds GTP-Ras in preference to GDP-Ras, and inhibits Ras-GAP activity. Mutations in and around the Ras effector domain impair Ras binding to Raf-1 (1-257) and Ras transforming activity in parallel.