Dbs was identified initially as a transforming protein and is a member of the Dbl family of proteins (>20 mammalian members). Here we show that Dbs, like its rat homolog Ost and the closely related Dbl, exhibited guanine nucleotide exchange activity for the Rho family members RhoA and Cdc42, but not Rac1, in vitro. Dbs transforming activity was blocked by specific inhibitors of RhoA and Cdc42 function, demonstrating the importance of these small GTPases in Dbs-mediated growth deregulation. Although Dbs transformation was dependent upon the structural integrity of its pleckstrin homology (PH) domain, replacement of the PH domain with a membrane localization signal restored transforming activity. Thus, the PH domain of Dbs (but not Dbl) may be important in modulating association with the plasma membrane, where its GTPase substrates reside. Both Dbs and Dbl activate multiple signaling pathways that include activation of the Elk-1, Jun, and NF-kappaB transcription factors and stimulation of transcription from the cyclin D1 promoter. We found that Elk-1 and NF-kappaB, but not Jun, activation was necessary for Dbl and Dbs transformation. Finally, we have observed that Dbl and Dbs regulated transcription from the cyclin D1 promoter in a NF-kappaB-dependent manner. Previous studies have dissociated actin cytoskeletal activity from the transforming potential of RhoA and Cdc42. These observations, when taken together with those of the present study, suggest that altered gene expression, and not actin reorganization, is the critical mediator of Dbl and Rho family protein transformation.