By screening for genes expressed differentially in pancreatic beta cells, we have isolated a cDNA encoding GRF beta, a novel 178-amino acid protein whose N terminus is identical to that of GRF1, a calcium-dependent guanine nucleotide exchange factor, and whose C terminus is unrelated to known proteins. We show that both GRF1 and GRF beta are expressed selectively in beta cell lines, pancreatic islet cells and brain. Treatment of beta cell lines (beta TC1 and HIT) with calcium ionophore led to a significant elevation in activity of the Ras signal transduction pathway, as determined by phosphorylation of extracellular signal-related kinase (ERK). Transfection of beta cells with a plasmid encoding a dominant negative variant of GRF1 led to 70% reduction in ERK phosphorylation, consistent with a role for GRF1 in calcium-dependent Ras signaling in these cells. To examine the possible function of GRF beta, cultured cells were transfected with a GRF beta expression vector. This led to a significant reduction in both GRF1-dependent ERK phosphorylation and AP1-dependent reporter gene activity. The results suggest that GRF1 plays a role in mediating calcium-dependent signal transduction in beta cells and that GRF beta represents a novel dominant negative modulator of Ras signaling.