A key aspect of neuromuscular synapse formation is the clustering of muscle acetylcholine receptors (AChR) at synaptic sites in response to neurally secreted agrin. Agrin-induced AChR clustering in cultured myotubes proceeds via the initial formation of small microclusters, which then aggregate to form AChR clusters. Here we show that the coupling of agrin signaling to AChR clustering is dependent on the coordinated activities of Rac and Rho GTPases. The addition of agrin induces the sequential activation of Rac and Rho in C2 muscle cells. The activation of Rac is rapid and transient and constitutes a prerequisite for the subsequent activation of Rho. This temporal pattern of agrin-induced Rac and Rho activation reflects their respective roles in AChR cluster formation. Whereas agrin-induced activation of Rac is necessary for the initial phase of AChR cluster formation, which involves the aggregation of diffuse AChR into microclusters, Rho activation is crucial for the subsequent condensation of these microclusters into full-size AChR clusters. Co-expression of constitutively active forms of Rac and Rho is sufficient to induce the formation of mature AChR clusters in the absence of agrin. These results establish that Rac and Rho play distinct but complementary roles in the mechanism of agrin-induced AChR clustering.