Guanine nucleotide exchange factors of the Dbl family regulate the actin cytoskeleton through activation of Rho-like GTPases. At present the Dbl family consists of more than thirty members; many have not been phenotypically or biochemically characterized. Guanine nucleotide exchange factors universally feature a Dbl homology domain followed by a pleckstrin homology domain. Employing data base screening we identified a recently cloned cDNA, KIAA0424, showing substantial sequence homology with Rac activators such as Tiam1, Sos, Vav, and PIX within the catalytic domain. This cDNA appears to be the human homologue of the Ascidian protein Posterior End Mark-2 (PEM-2). We refer to this exchanger as hPEM-2. hPEM-2 encodes a protein of 70 kDa and features an N-terminal src homology 3 domain, followed by tandem Dbl homology and pleckstrin homology domains. The gene is highly expressed in brain and is localized on the human X-chromosome. Employing biochemical activity assays for Rho-like GTPases we found that hPEM-2 specifically activates Cdc42 and not Rac or RhoA. Ectopic expression of hPEM-2 in NIH3T3 fibroblasts revealed a Cdc42 phenotype featuring filopodia formation, followed by cortical actin polymerization and cell rounding. hPEM-2 represents an exchange factor, which may have a role in the regulation of a number of cellular processes through Cdc42.