The X-linked disorder oculocerebrorenal syndrome of Lowe is caused by mutation of the OCRL1 protein, an inositol polyphosphate 5-phosphatase. OCRL1 is localised to the Golgi apparatus and early endosomes, and can translocate to lamellipodia upon growth factor stimulation. We show here that OCRL1 interacts with several members of the rab family of small GTPases. Strongest interaction is seen with Golgi-associated rab1 and rab6 and endosomal rab5. Point mutants defective in rab binding fail to target to the Golgi apparatus and endosomes, strongly suggesting rab interaction is required for targeting of OCRL1 to these compartments. Membrane recruitment via rab binding is required for changes in Golgi and endosomal dynamics induced by overexpression of catalytically inactive OCRL1. In vitro experiments demonstrate that rab5 and rab6 directly stimulate the 5-phosphatase activity of OCRL1. We conclude that rabs play a dual role in regulation of OCRL1, firstly targeting it to the Golgi apparatus and endosomes, and secondly, directly stimulating the 5-phosphatase activity of OCRL1 after membrane recruitment.