Posttranslational modification of proteins with farnesyl and geranylgeranyl isoprenoids is a widespread phenomenon in eukaryotic organisms. Isoprenylation is conferred by three protein prenyltransferases: farnesyl transferase (FTase), geranylgeranyl transferase typed (GGTase-1), and Rab geranylgeranyltransferase, (RabGGTase). Inhibitors of these enzymes have emerged as promising therapeutic compounds for treatment of cancer, viral and parasite originated diseases, as well as osteoporosis. However, no generic nonradioactive protein prenyltransferase assay has been reported to date, complicating identification of enzyme-specific inhibitors. We have addressed this issue by developing two fluorescent analogues of farnesyl and geranylgeranyl pyrophosphates {3,7-dimethyl-8-(7-nitro-benzo[1,2,5]oxadiazol-4-ylamino)-octa-2,6-diene -1}pyrophosphate (NBD-GPP) and {3,7,11-trimethyl-12-(7-nitro-benzo[1,2,5]oxadiazo-4-ylamino)-dodeca-2,6 ,1 0-trien-1} pyrophosphate (NBD-FPP), respectively. We demonstrate that these compounds can serve as efficient lipid donors for prenyltransferases. Using these fluorescent lipids, we have developed two simple (SDS-PAGE and bead-based) in vitro prenylation assays applicable to all prenyltransferases. Using the SDS-PAGE assay, we found that, in contrast to previous reports, the tyrosine phosphatase PRL-3 may possibly be a dual substrate for both FTase and GGTase-1. The on-bead prenylation assay was used to identify prenyltransferase inhibitors that displayed nanomolar affinity for RabGGTase and FTase. Detailed analysis of the two inhibitors revealed a complex inhibition mechanism in which their association with the peptide binding site of the enzyme reduces the enzyme's affinity for lipid and peptide substrates without competing directly with their binding. Finally, we demonstrate that the developed fluorescent isoprenoids can directly and efficiently penetrate into mammalian cells and be incorporated in vivo into small GTPases.