Guanine nucleotide exchange factor activation of Rho G-proteins is critical for cytoskeletal reorganization. In the yeast Saccharomyces cerevisiae, the sole guanine nucleotide exchange factor for the Rho G-protein Cdc42p, Cdc24p, is essential for its site-specific activation. Several mammalian exchange factors have been shown to oligomerize; however, the function of this homotypic interaction is unclear. Here we show that Cdc24p forms oligomers in yeast via its catalytic Dbl homology domain. Mutation of residues critical for Cdc24p oligomerization also perturbs the localization of this exchange factor yet does not alter its catalytic activity in vitro. Chemically induced oligomerization of one of these oligomerization-defective mutants partially restored its localization to the bud tip and nucleus. Furthermore, chemically induced oligomerization of wild-type Cdc24p does not affect in vitro exchange factor activity, yet it results in a decrease of activated Cdc42p in vivo and the presence of Cdc24p in the nucleus at all cell cycle stages. Together, our results suggest that Cdc24p oligomerization regulates Cdc42p activation via its localization.