We report that residues Lys-16 and Asp-119 play critical roles in the guanine nucleotide binding and, consequently, the biological function of the Ha-ras-encoded protein (Ha). Substitution of an asparagine residue for Lys-16 reduces the affinity of Ha for GDP and GTP by a factor of 100 but does not alter the specificity of nucleotide binding. The replacement of Asp-119 with an alanine residue reduces the affinity of Ha for GDP and GTP by a factor of 20 and reduces the relative affinity of Ha for GDP over IDP from 200-500 to 10. Based on these observations, a structural model for the GDP/GTP-binding site of Ha is proposed. By microinjecting purified proteins into NIH 3T3 cells, we observed that the ability of [Ala119]Ha to induce changes characteristic of cellular transformation was much greater than that of normal Ha and similar to that of the oncogenic [Val12, Thr59]Ha. In this assay, [Asn16]Ha and [Val12, Asn16, Thr59]Ha were similar in potency to normal Ha. In yeast cells, Ha proteins with reduced nucleotide affinity exert a dominant temperature-dependent lethality that is avoided by the coexpression of the activated yeast ras gene [Ala18, Val19]RAS2. We interpret the biological consequences of reducing the nucleotide affinity of ras proteins in terms of two opposing factors: a growth-promoting effect, resulting from an increase in the GDP-GTP exchange rate, and a growth-limiting effect, resulting from an increase in the nucleotide-free ras protein species.