Activation of G protein-coupled receptors at the cell surface leads to the activation or inhibition of intracellular effector enzymes, which include various Rho guanine nucleotide exchange factors (RhoGEFs). RhoGEFs activate small molecular weight GTPases at the plasma membrane (PM). Many of the known G protein-coupled receptor-regulated RhoGEFs are found in the cytoplasm of unstimulated cells, and PM recruitment is a critical aspect of their regulation. In contrast, p63RhoGEF, a G␣ q -regulated RhoGEF, appears to be constitutively localized to the PM. The objective of this study was to determine the molecular basis for the localization of p63RhoGEF and the impact of its subcellular localization on its regulation by G␣ q . Herein, we show that the pleckstrin homology domain of p63RhoGEF is not involved in its PM targeting. Instead, a conserved string of cysteines (Cys-23/25/26) at the N terminus of the enzyme is palmitoylated and required for membrane localization and full basal activity in cells. Conversion of these residues to serine relocates p63RhoGEF from the PM to the cytoplasm, diminishes its basal activity, and eliminates palmitoylation. The activity of palmitoylation-deficient p63RhoGEF can be rescued by targeting to the PM by fusion with tandem phospholipase C-␦1 pleckstrin homology domains or by co-expression with wild-type G␣ q but not with palmitoylation-deficient G␣ q . Our data suggest that p63RhoGEF is regulated chiefly through allosteric control by G␣ q , as opposed to other known G␣-regulated RhoGEFs, which are instead sequestered in the cytoplasm, perhaps because of their high basal activity.Rho GTPases act as molecular switches that mediate a wide variety of cellular processes, such as actin cytoskeletal organization, cell migration, cell cycle progression, and transcriptional control (1-3). They are activated by Rho guanine nucleotide exchange factors (RhoGEFs), 3 which catalyze the exchange of GDP for GTP on the G protein (4, 5). The largest family of RhoGEFs is characterized by a Dbl homology (DH) domain that is almost always found immediately N-terminal to a pleckstrin homology (PH) domain. The DH domain forms the primary binding site for the GTPase, whereas the PH domain either modulates nucleotide exchange by the DH domain or has other functions. Heterotrimeric G-protein ␣ subunits are known to directly interact with and activate at least two classes of Dbl family RhoGEFs (6 -8). G␣ 12/13 subunits bind to the regulator of G protein signaling (RGS) homology (RH) domain of RH domaincontaining RhoGEFs (RH-RhoGEFs) such as leukemia-associated RhoGEF (LARG), PDZ-RhoGEF, and p115-RhoGEF (9 -12). G␣ q/11 subunits bind to the DH/PH core of another subfamily of RhoGEFs that includes p63RhoGEF and the C-terminal DH/PH domains of Trio and Duet (13,14). Because small GTPases are tethered to the plasma membrane (PM) via posttranslational prenylation of their C-terminal CAAX motifs (15), RhoGEFs must also be targeted to the PM in order to efficiently activate their substrates in living cells. Because...