We have previously demonstrated that both isoprenylcysteine carboxylmethyltransferase (ICMT) and one of its substrates, the RhoGTPase Rac1, are critical for the tumor necrosis factor alpha (TNF alpha) stimulation of vascular cell adhesion molecule-1 expression in endothelial cells (EC). Here, we have shown that ICMT regulates TNF alpha stimulation of Rac1 activity. TNF alpha stimulation of EC increased the membrane association of Rac1, an event that is essential for Rac1 activity. ICMT inhibitor N-acetyl-S-farnesyl-L-cysteine (AFC) blocked the accumulation of Rac1 into the membrane both in resting and TNF alpha-stimulated conditions. Similarly, the membrane-associated Rac1 was lower in Icmt-deficient versus wild-type mouse embryonic fibroblasts (MEFs). TNF alpha also increased the level of GTP-Rac1, the active form of Rac1, in EC. AFC completely suppressed the TNF alpha stimulation of increase in GTP-Rac1 levels. Confocal microscopy revealed resting EC Rac1 was present in the plasma membrane and also in the perinuclear region. AFC mislocalized Rac1, both from the plasma membrane and the perinuclear region. Mislocalization of Rac1 was also observed in Icmt-deficient versus wild-type MEFs. To determine the consequences of ICMT inhibition, we investigated the effect of AFC on p38 mitogen-activated protein (MAP) kinase phosphorylation, which is downstream of Rac1. AFC inhibited the TNF alpha stimulation of p38 MAP kinase phosphorylation in EC. TNF alpha stimulation of p38 MAP kinase phosphorylation was also significantly attenuated in Icmt-deficient versus wild-type MEFs. To understand the mechanism of inhibition of Rac1 activity, we examined the effect of ICMT inhibition on the interaction of Rac1 with its inhibitor, Rho guanine nucleotide dissociation inhibitor (RhoGDI). The association of Rac1 with its inhibitor RhoGDI was dramatically increased in the Icmt-deficient versus wild-type MEFs both in resting as well as in TNF alpha-stimulated conditions, suggesting that RhoGDI was involved in inhibiting Rac1 activity under the conditions of ICMT inhibition. These results suggest that ICMT regulates Rac1 activity by controlling the interaction of Rac1 with RhoGDI. We hypothesize that ICMT regulates the release of Rac1 from RhoGDI.