Phosphoinositide-3-OH kinase (PI(3)K), activated through growth factor stimulation, generates a lipid second messenger, phosphatidylinositol-<em>3,4,5</em>-trisphosphate (<em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em>). <em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em> is instrumental in signalling pathways that trigger cell activation, cytoskeletal rearrangement, survival and other reactions. However, some targets of <em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em> are yet to be discovered. We demonstrate that SWAP-70, a unique signalling protein, specifically binds <em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em>. 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 <em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em> 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 <em>PtdIns</em>(<em>3,4,5</em>)<em>P3</em>-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.