Pak kinases are a family of serine/threonine protein kinases homologous to Ste20p of yeast. Paks can be activated in vivo and in vitro by binding to GTP-bound Cdc42 and Rac1, members of the Rho family of small GTPases implicated in regulating the organization of the actin cytoskeleton. We have previously reported that the SH2/SH3-containing adaptor protein Nck binds Pak kinase through its second SH3 domain. Pak1 can be targeted to the membrane by Nck in response to tyrosine phosphorylation, and membrane association of Pak1 is sufficient to increase its specific activity. The mechanism whereby Pak is activated by membrane localization, however, is unknown. We show here that expression of three proteins that inhibit Rho-family GTPases by different mechanisms (RhoGDI, Bcr and D57Y Cdc42) all block the activation of Pak by a membrane-targeted Nck SH3 domain, demonstrating that the in vivo activation of Pak1 induced by membrane localization is dependent on Rho-family GTPases. This implies that Pak activity can be regulated in cells both by the level of GTP loading of various Rho-family GTPases and the local concentration of Pak relative to these GTPases. Our data also suggest the existence of Rho-family GTPases in addition to Cdc42 and Rac1 that can activate Pak on membranes.