The GTPase Rac1 is a key component in the reorganization of the actin cytoskeleton that is induced by growth factors or oncogenic Ras1. Here we investigate the role of Rac1 in cell transformation and show that Rat1 fibroblasts expressing activated Val-12 Rac1 (Rac1 with valine at residue 12) display all the hallmarks of malignant transformation. In a focus-forming assay in NIH3T3 fibroblasts to measure the efficiency of transformation, we found that dominant-negative Asn-17 Rac1 inhibited focus formation by oncogenic Ras, but not by RafCAAX, a Raf kinase targeted to the plasma membrane by virtue of the addition of a carboxyterminal localization signal from K-Ras. This indicates that Rac is essential for transformation by Ras. In addition, Val-12 Rac1 synergizes strongly with RafCAAX in focus-formation assays, indicating that oncogenic Ras drives both the Rac and MAP-kinase pathways, which cooperate to cause transformation.