At the beginning of the budding yeast cell cycle, the GTPase Cdc42p promotes the assembly of a ring of septins at the site of future bud emergence. Here, we present an analysis of cdc42 mutants that display specific defects in septin organization, which identifies an important role for GTP hydrolysis by Cdc42p in the assembly of the septin ring. The mutants show defects in basal or stimulated GTP hydrolysis, and the septin misorganization is suppressed by overexpression of a Cdc42p GTPase-activating protein (GAP). Other mutants known to affect GTP hydrolysis by Cdc42p also caused septin misorganization, as did deletion of Cdc42p GAPs. In performing its roles in actin polarization and transcriptional activation, GTP-Cdc42p is thought to function by activating and/or recruiting effectors to the site of polarization. Excess accumulation of GTP-Cdc42p due to a defect in GTP hydrolysis by the septin-specific alleles might cause unphysiological activation of effectors, interfering with septin assembly. However, the recessive and dose-sensitive genetic behavior of the septin-specific cdc42 mutants is inconsistent with the septin defect stemming from a dominant interference of this type. Instead, we suggest that assembly of the septin ring involves repeated cycles of GTP loading and GTP hydrolysis by Cdc42p. These results suggest that a single GTPase, Cdc42p, can act either as a ras-like GTP-dependent "switch" to turn on effectors or as an EF-Tu-like "assembly factor" using the GTPase cycle to assemble a macromolecular structure.