The handicap principle holds that costly sexual signals can reliably indicate mate quality. Only individuals of high quality can afford a strong signal—the cost of signaling is relatively lower for high-quality signalers than for low-quality signalers. This critical property is difficult to test experimentally because the benefit of signaling on mating success, and cost of signaling on other components of fitness, cannot easily be separated in obligate sexual organisms. We therefore studied the facultatively sexual yeast Saccharomyces cerevisiae, which produces pheromones to attract potential mates. To precisely measure the cost of signaling, the signal was reduced or removed by deleting one or both copies of the pheromone-encoding genes and measuring asexual growth rate in competition with a wild-type signaler. We manipulated signaler quality either by changing the quality of the assay environment or by changing the number of deleterious mutations carried. For both types of treatment, we found that the cost of signaling decreased as the quality of the signaler increased, demonstrating that the yeast pheromone signal has the key property required for selection under the handicap principle. We found that cells of high genetic quality produce stronger signals than low-quality cells, verifying that the signal is indeed honest.