The final step in post-translational processing of Ras and Rho GTPases involves methylation of the prenylated cysteine residue by an isoprenylcysteine-O-carboxyl methyltransferase (ICMT). ICMT activity is essential for cell growth and development in higher eukaryotes, and inhibition of GTPase methylation has become an attractive target in cancer therapy to inactivate prenylated oncoproteins. However, the specificity and dynamics of the GTPase methylation process remain to be fully clarified. Notably, cells lacking Mam4, the ICMT ortholog in the fission yeast Schizosaccharomyces pombe, are viable. We have exploited this feature to analyze the role of methylation on GTPase localization and function. We show that methylation differentially affects GTPase membrane localization, being particularly relevant for plasma membrane tethering and downstream signaling of palmitoylated and farnesylated GTPases Ras1 and Rho2 lacking C-terminal polybasic motifs. Indeed, Ras1 and Rho2 cysteine methylation is required for proper regulation of differentiation elicited by MAPK Spk1 and for stress-dependent activation of the cell integrity pathway (CIP) and its main effector MAPK Pmk1. Further, Mam4 negatively regulates TORC2 signaling by a cross-inhibitory mechanism relying on Rho GTPase methylation. These results highlight the requirement for a tight control of GTPase methylation in vivo to allow adequate GTPase function.