The adenomatous polyposis coli gene (APC) is mutated in familial adenomatous polyposis and in sporadic colorectal tumors. Here the APC gene product is shown to bind through its armadillo repeat domain to a Rac-specific guanine nucleotide exchange factor (GEF), termed Asef. Endogenous APC colocalized with Asef in mouse colon epithelial cells and neuronal cells. Furthermore, APC enhanced the GEF activity of Asef and stimulated Asef-mediated cell flattening, membrane ruffling, and lamellipodia formation in MDCK cells. These results suggest that the APC-Asef complex may regulate the actin cytoskeletal network, cell morphology and migration, and neuronal function.