The CAAX farnesyltransferase is a heterodimeric enzyme that attaches a farnesyl group to a single cysteine in cellular proteins which terminate in the sequence CAAX, where C is cysteine, A is an aliphatic amino acid, and X is most often methionine or serine. Substrates include the p21ras proteins, nuclear lamins, and a series of retinal proteins. To date, a limited number of substrates for the farnesyltransferase have been identified, predominantly by demonstration of the attachment of a farnesyl group to previously identified cDNA clones which encode proteins containing an appropriate carboxyl-terminal tetrapeptide. We describe here the use of a cDNA fusion protein expression library, together with enzymatic in vitro [3H]farnesyl radiolabeling, as a means of identifying novel farnesylated proteins. One candidate cDNA was fully cloned and found to be a homologue of the Escherichia coli heat shock gene dnaJ. The predicted amino acid sequence of this protein was found to terminate with the tetrapeptide Cys-Ala-His-Gln, which conforms to the consensus sequence for recognition by farnesyltransferase, and was shown to undergo in vivo farnesylation. This farnesylated protein, designated RDJ2 (rat DnaJ homologue 2), is a novel and ubiquitously expressed DnaJ homologue and is the newest member of the subfamily of DnaJ-related proteins which are posttranslationally modified by protein farnesylation.