The human lbc oncogene product is a guanine nucleotide exchange factor that specifically activates the Rho small GTP binding protein, thus resulting in biologically active, GTP-bound Rho, which in turn mediates actin cytoskeletal reorganization, gene transcription, and entry into the mitotic S phase. In order to elucidate the mechanism of onco-Lbc transformation, here we report that while proto-and onco-lbc cDNAs encode identical N-terminal dbl oncogene homology (DH) and pleckstrin homology (PH) domains, proto-Lbc encodes a novel C terminus absent in the oncoprotein that includes a predicted ␣-helical region homologous to cyto-matrix proteins, followed by a proline-rich region. The lbc proto-oncogene maps to chromosome 15, and onco-lbc represents a fusion of the lbc proto-oncogene N terminus with a short, unrelated C-terminal sequence from chromosome 7. Both onco-and proto-Lbc can promote formation of GTP-bound Rho in vivo. Proto-Lbc transforming activity is much reduced compared to that of onco-Lbc, and a significant increase in transforming activity requires truncation of both the ␣-helical and proline-rich regions in the proto-Lbc C terminus. Deletion of the chromosome 7-derived C terminus of onco-Lbc does not destroy transforming activity, demonstrating that it is loss of the proto-Lbc C terminus, rather than gain of an unrelated C-terminus by onco-Lbc, that confers transforming activity. Mutations of onco-Lbc DH and PH domains demonstrate that both domains are necessary for full transforming activity. The proto-Lbc product localizes to the particulate (membrane) fraction, while the majority of the onco-Lbc product is cytosolic, and mutations of the PH domain do not affect this localization. The proto-Lbc C-terminus alone localizes predominantly to the particulate fraction, indicating that the C terminus may play a major role in the correct subcellular localization of proto-Lbc, thus providing a mechanism for regulating Lbc oncogenic potential.The family of DH (dbl oncogene homology) domain-encoding oncogenes (8, 40) represents a unique category of transforming genes involved in cellular growth control. The DH domain is associated with guanine nucleotide exchange activation for the Rho/Rac family of small GTP binding proteins (8), resulting in the conversion of the inactive, GDP-bound form of the GTPase to the active, GTP-bound form capable of transducing signals (5,14). In all cases, the DH domain is followed by a pleckstrin homology (PH) domain (5, 34) which can have multiple functions. Thus, these catalytic GDP-GTP exchange factors (GEFs) play a key role in regulating the Rho/Rac GTPase cycle. The Rho/Rac family of small GTPases mediates cytoskeletal reorganization (15), gene transcription (20), and cell cycle progression (36) through unique signal transduction pathways.The 424-amino-acid Lbc oncoprotein is transforming both in vivo and in vitro and contains an N-terminal EF hand motif followed by DH and PH domains (49). We have shown that onco-Lbc activates the Rho small GTP binding protein by catalytica...