The Wnt planar cell polarity (Wnt/PCP) pathway signals through small Rho-like GTPases to regulate the cytoskeleton. The core PCP proteins have been mapped to the Wnt/PCP pathway genetically, but the molecular mechanism of their action remains unknown. Here, we investigate the function of the mammalian PCP protein Vang-like protein 2 (Vangl2). RNAi knockdown of Vangl2 impaired cell-cell adhesion and cytoskeletal integrity in the epithelial cell lines HEK293T and MDCK. Similar effects were observed when Vangl2 was overexpressed in HEK293T, MDCK or C17.2 cells. The effects of Vangl2 overexpression could be blocked by knockdown of the small GTPase Rac1 or by dominant-negative Rac1. In itself, knockdown of Rac1 impaired cytoskeletal integrity and reduced cell-cell adhesion. We found that Vangl2 bound and re-distributed Rac1 within the cells but did not alter Rac1 activity. Moreover, both transgenic mouse embryos overexpressing Vangl2 in neural stem cells and loop-tail Vangl2 loss-of-function embryos displayed impaired adherens junctions, a cytoskeletal unit essential for neural tube rigidity and neural tube closure. In vivo, Rac1 was re-distributed within the cells in a similar way to that observed by us in vitro. We propose that Vangl2 affects cell adhesion and the cytoskeleton by recruiting Rac1 and targeting its activity in the cell to adherens junctions.