Rac1 is a small guanine-nucleotide binding protein that cycles between an inactive GDP-bound and active GTP-bound state to regulate cell motility and migration. Rac1 signaling is initiated from the plasma membrane (PM). Here we used high-resolution spatial mapping and manipulation of PM lipid composition to define Rac1 nanoscale organization. We found that Rac1 in the GTP- and GDP-bound states assemble into non-overlapping nanoclusters, thus Rac1 proteins undergo nucleotide-dependent segregation. Rac1 also selectively interacts with phosphatidic acid (PA) and phosphoinositol (3,4,5)-trisphosphate (PIP), resulting in nanoclusters enriched in these lipids. These lipids are structurally important because depleting the PM of PA or PIP impairs both Rac1 PM binding and Rac1 nanoclustering. Lipid binding specificity of Rac1 is encoded in the amino acid sequence of the polybasic domain (PBD) of the C-terminal membrane anchor. Point mutations within the PBD, including arginine to lysine substitutions, profoundly alter Rac1 lipid binding specificity without changing electrostatics of the protein, and result in impaired macropinocytosis and decreased cell spreading. We propose that Rac1 nanoclusters act as lipid based signaling platforms emulating the spatiotemporal organization of Ras proteins and show that the Rac1 PBD-prenyl anchor has a biological function that extends beyond simple electrostatic engagement with the PM.