One of the essential protein substrates of geranylgeranyl transferase type I in the budding yeast Saccharomyces cerevisiae is a rho-type GTPase, Rho1p, which is a regulatory subunit of 1, 3-beta-glucan synthase. Previous studies have indicated that modification of Rho1p is significantly reduced in a mutant of the beta subunit of geranylgeranyl transferase type I called cal1-1. Here we present genetic and biochemical evidence showing that modification of Rho1p is required for activity of 1,3-beta-glucan synthase. The 1,3-beta-glucan synthase activity of the cal1-1 membrane was significantly reduced compared with that of the wild-type membrane. The impaired activity was partly due to the reduced amount of Fks1p, a putative catalytic subunit of 1, 3-beta-glucan synthase, but also partly due to reduced affinity between unmodified Rho1p and Fks1p. Glutathione S-transferase (GST)-Rho1 proteins with or without the C-terminal motif required for the modification were purified and used to analyze the interaction. The modified form of GST-Rho1p was specifically able to restore the 1,3-beta-glucan synthase of the rho1-3 membrane. Gel overlay analysis indicated that an unmodified form of GST-Rho1p fails to interact with Fks1p. These results indicated that the geranylgeranylation of Rho1p is a prerequisite to the assembly and activation of 1,3-beta-glucan synthase in vitro. Increased cytoplasmic levels of divalent cations such as Ca(2+) restored both Rho1p modification and the 1,3-beta-glucan synthase activity of cal1-1, suggesting that cytoplasmic levels of the divalent cations affect geranylgeranyl transferase type I activity in vivo.