To study the physiological function of diacylglycerol (DAG) kinase iota (DGKiota), which converts DAG to phosphatidic acid, we deleted this gene in mice. In contrast to previous studies showing that DGK isoforms decrease Ras activity, signaling downstream of Ras in embryonic fibroblasts was significantly reduced in cells lacking DGKiota. DGKs regulate Ras signaling by attenuating the function of the DAG-dependent Ras guanyl nucleotide-releasing proteins (RasGRPs). We tested whether DGKiota inhibited the four known RasGRPs and found that it inhibited only RasGRP3. In addition to activating Ras, RasGRP3 also activates Rap1, which in some cases can antagonize the function of Ras. We demonstrate that DGKiota bound to RasGRP3 and inhibited its activation of Rap1 by metabolizing DAG. This inhibition consequently affected Ras signaling. We tested the physiological consequence of deleting DGKiota by crossing wild-type or DGKiota-deficient mice with mice carrying a v-Ha-Ras transgene, and then we assessed tumor formation. We observed significantly fewer tumors in DGKiota-deficient mice. Because Rap1 can antagonize the function of Ras, our data are consistent with a model in which DGKiota regulates RasGRP3 with a predominant effect on Rap1 activity. Additionally, we found that DGKzeta, which is structurally similar to DGKiota, inhibited RasGRPs 1, 3, and 4 and predominantly affected Ras signaling. Thus, type IV DGKs regulate RasGRPs, but the downstream effects differ depending on the DGK.