Signal transduction mediated by phosphatidylinositol 3-kinase (PI 3-kinase) is regulated by hydrolysis of its products, a function performed by the 145-kDa SH2 domain-containing inositol phosphatase (SHIP). Here, we show that bone marrow macrophages of SHIP(-/-) animals have elevated levels of phosphatidylinositol 3,4,5-trisphosphate [PI (3,4,5)P(3)] and displayed higher and more prolonged chemotactic responses to macrophage colony-stimulating factor (M-CSF) and elevated levels of F-actin relative to wild-type macrophages. We also found that the small GTPase Rac was constitutively active and its upstream activator Vav was constitutively phosphorylated in SHIP(-/-) macrophages. Furthermore, we show that Vav in wild-type macrophages is recruited to the membrane in a PI 3-kinase-dependent manner through the Vav pleckstrin homology domain upon M-CSF stimulation. Dominant inhibitory mutants of both Rac and Vav blocked chemotaxis. We conclude that Vav acts as a PI 3-kinase-dependent activator for Rac activation in macrophages stimulated with M-CSF and that SHIP regulates macrophage M-CSF-triggered chemotaxis by hydrolysis of PI (3,4,5)P(3).