The small GTP-binding proteins Rac and Rho are key elements in the signal-transduction pathways respectively controlling the formation of lamellipodia and stress fibers induced by growth factors or oncogenic Ras. We recently reported that Rac function is necessary for Ras transformation and that expression of constitutively activated Rac1 is sufficient to cause malignant transformation. We now show that, although expression of constitutively activated V14-RhoA in Rat 1 fibroblasts does not cause transformation on its own, it strongly cooperates with constitutively active RafCAAX in focus-formation assays in NIH 3T3 cells. Furthermore, dominant-negative N19-RhoA inhibits focus formation by V12-H-Ras and RafCAAX in NIH 3T3 cells, and stable coexpression of N19-RhoA and V12-H-Ras in Rat1 fibroblasts reverts Ras transformation. Interestingly, stress fiber formation is inhibited in V12-H-Ras lines and restored by coexpression of N19-RhoA. We conclude that Rho drives at least two separate pathways, one that induces stress fiber formation and another one that is important for transformation by oncogenic Ras.