Rho proteins are small GTP/GDP-binding proteins primarily involved in cytoskeleton regulation. Their GTP/GDP cycle is often tightly connected to a membrane/cytosol cycle regulated by the Rho guanine nucleotide dissociation inhibitor ␣ (RhoGDI␣). RhoGDI␣ has been regarded as a housekeeping regulator essential to control homeostasis of Rho proteins. Recent proteomic screens showed that RhoGDI␣ is extensively lysine-acetylated. Here, we present the first comprehensive structural and mechanistic study to show how RhoGDI␣ function is regulated by lysine acetylation. We discover that lysine acetylation impairs Rho protein binding and increases guanine nucleotide exchange factor-catalyzed nucleotide exchange on RhoA, these two functions being prerequisites to constitute a bona fide GDI displacement factor. RhoGDI␣ acetylation interferes with Rho signaling, resulting in alteration of cellular filamentous actin. Finally, we discover that RhoGDI␣ is endogenously acetylated in mammalian cells, and we identify CBP, p300, and pCAF as RhoGDI␣-acetyltransferases and Sirt2 and HDAC6 as specific deacetylases, showing the biological significance of this post-translational modification.