Cell polarization occurs along a single axis that is generally determined in response to spatial cues. In budding yeast, the Rsr1 GTPase and its regulators direct the establishment of cell polarity at the proper cortical location in response to cell type–specific cues. Here we use a combination of in vivo and in vitro approaches to understand how Rsr1 polarization is established. We find that Rsr1 associates with itself in a spatially and temporally controlled manner. The homotypic interaction and localization of Rsr1 to the mother-bud neck and to the subsequent division site are dependent on its GDP-GTP exchange factor Bud5. Analyses of rsr1 mutants suggest that Bud5 recruits Rsr1 to these sites and promotes the homodimer formation. Rsr1 also exhibits heterotypic interaction with the Cdc42 GTPase in vivo. We show that the polybasic region of Rsr1 is necessary for the efficient homotypic and heterotypic interactions, selection of a proper growth site, and polarity establishment. Our findings thus suggest that dimerization of GTPases may be an efficient mechanism to set up cellular asymmetry.