The Rho subfamily GTP-binding protein Cdc42 mediates actin cytoskeletal rearrangements and cell cycle progression and is essential for Ras transformation. Expression of a Cdc42 mutant (Cdc42(F28L)) that undergoes spontaneous activation (guanine nucleotide exchange) results in transformation of NIH3T3 fibroblasts. In this report, we show that deletion of residues 120-139 from Cdc42(F28L), which comprise an insert region unique to Rho subfamily proteins but is missing in other GTP-binding proteins, yields a Cdc42 molecule that still undergoes spontaneous GTP-GDP exchange and stimulates both actin cytoskeletal changes and the activation of the cellular targets p21-activated kinase and the c-Jun kinase (JNK1). However, this Cdc42 mutant is unable to transform cells. These findings indicate that the Rho subfamily insert region is dispensable for many of the known signaling pathways initiated by activated Cdc42 but is essential for its regulation of cell growth.