Phosphoinositide-3-OH kinase (PI(3)K), activated through growth factor stimulation, generates a lipid second messenger, phosphatidylinositol-3,4,5-trisphosphate (PtdIns(3,4,5)P₃)^,,,,. PtdIns(3,4,5)P₃ is instrumantal in signalling pathways that trigger cell activation, cytoskeletal rearrangement, survival and other reactions. However, some targets of PtdIns(3,4,5)P₃ are yet to be discovered^,,,,,,. We demonstrate that SWAP-70, a unique signalling protein^,,, specifically binds PtdIns(3,4,5)P₃. On stimulation by growth factors, cytoplasmic SWAP-70, which is dependent on PI(3)K but independent of Ras, moved to cell membrane rearrangements known as ruffles. However, mutant SWAP-70 lacking the ability to bind PtdIns(3,4,5)P₃ blocked membrane ruffling induced by epidermal growth factor or platelet-derived growth factor. SWAP-70 shows low homology with Rac-guanine nucleotide exchange factors (GEFs), and catalyses PtdIns(3,4,5)P₃-dependent guanine nucleotide exchange to Rac. SWAP-70-deficient fibroblasts showed impaired membrane ruffling after stimulation with epidermal growth factor, and failed to activate Rac fully. We conclude that SWAP-70 is a new type of Rac-GEF which, independently of Ras, transduces signals from tyrosine kinase receptors to Rac.