The Formin proteins are central players in mediating cytoskeletal reorganization and are epistatically positioned in a pathway downstream of Rho activation. These proteins exist in the cytoplasm in an autoinhibited state, which is mediated by intramolecular interactions between the amino-terminal GTPase binding domain (GBD) that encompasses the diaphanous inhibitory domain (DID) and the carboxyl-terminal diaphanous autoregulatory domain (DAD). It has been proposed that the binding of Rho within the GBD releases this molecule from autoinhibition by disrupting the DID/DAD interactions. Here we report that Daam1 is not significantly activated by Rho binding but rather by its interaction with Dishevelled (Dvl). Removal of the DAD domain disrupts interactions between Dvl and Daam1, and the binding of Dvl to Daam1 disrupts the interaction between the GBD and DAD that mediates Daam1 autoinhibition. Mutations within or removal of the DAD converts Daam1 into an active protein that can induce Rho activation. We further demonstrate that Dvl synergizes with Daam1 to regulate gastrulation during Xenopus embryogenesis and that expression of activated Daam1 can rescue impaired convergent extension movements resulting from deregulated noncanonical Wnt signaling. Our studies together define the importance of a carboxyl-terminal binding partner, Dvl, that leads to the activation of Daam1.