Proteins terminating with a CAAX motif, such as the Ras proteins and the nuclear lamins, undergo post-translational modification of a C-terminal cysteine with an isoprenyl lipid via a process called protein prenylation. After prenylation, the last three residues of CAAX proteins are clipped off by Rce1, an integral membrane endoprotease of the endoplasmic reticulum. Prenylation is crucial to the function of many CAAX proteins, but the physiologic significance of endoproteolytic processing has remained obscure. To address this issue, we used Cre/loxP recombination techniques to create mice lacking Rce1 in the heart, an organ where Rce1 is expressed at particularly high levels. The hearts from heart-specific Rce1 knockout mice manifested reduced levels of both the Rce1 mRNA and CAAX endoprotease activity, and the hearts manifested an accumulation of CAAX protein substrates. The heart-specific Rce1 knockout mice initially appeared healthy but died starting at 3-5 months of age. By 10 months of age, approximately 70% of the mice had died. Pathological studies revealed that the heart-specific Rce1 knockout mice had a dilated cardiomyopathy. By contrast, liver-specific Rce1 knockout mice appeared healthy, had normal transaminase levels, and had normal liver histology. These studies indicate that the endoproteolytic processing of CAAX proteins is essential for cardiac function but is less important for the liver.