The P-Rex (phosphatidylinositol(3,4,5)-trisphosphate (PIP3)-dependent Rac exchanger) family (P-Rex1 and P-Rex2) of Rho guanine nucleotide exchange factors (Rho GEFs) activate Rac GTPases to regulate cell migration, invasion and metastasis in several human cancers. The family is unique among Rho GEFs as their activity is regulated by the synergistic binding of PIP3 and Gbetagamma at the plasma membrane. However, the molecular mechanism of this family of multi-domain proteins remains unclear. We report the 1.95 A crystal structure of the catalytic P-Rex1 DH-PH tandem domain in complex with its cognate GTPase, Rac1 (Ras-related C3 botulinum toxin substrate-1). Mutations in the P-Rex1:Rac1 interface reveal a critical role of this complex in signaling downstream of receptor tyrosine kinases and G protein-coupled receptors. Structural data indicate the PIP3/Gbetagamma binding sites are on the opposite surface and markedly removed from the Rac1 interface, supporting a model whereby P-Rex1 binding to PIP3 and/or Gbetagamma releases inhibitory C-terminal domains to expose the Rac1 binding site.