Rho guanosine triphosphatases (GTPases) are critical regulators of cytoskeletal dynamics and control complex functions such as cell adhesion, spreading, migration, and cell division. It is generally accepted that localized GTPase activation is required for the proper initiation of downstream signaling events, although the molecular mechanisms that control targeting of Rho GTPases are unknown. In this study, we show that the Rho GTPase Rac1, via a proline stretch in its COOH terminus, binds directly to the SH3 domain of the Cdc42/Rac activator beta-Pix (p21-activated kinase [Pak]-interacting exchange factor). The interaction with beta-Pix is nucleotide independent and is necessary and sufficient for Rac1 recruitment to membrane ruffles and to focal adhesions. In addition, the Rac1-beta-Pix interaction is required for Rac1 activation by beta-Pix as well as for Rac1-mediated spreading. Finally, using cells deficient for the beta-Pix-binding kinase Pak1, we show that Pak1 regulates the Rac1-beta-Pix interaction and controls cell spreading and adhesion-induced Rac1 activation. These data provide a model for the intracellular targeting and localized activation of Rac1 through its exchange factor beta-Pix.