The Rho-GTPase Rac1 promotes actin polymerization and membrane protrusion that mediate initial contact and subsequent maturation of cell-cell junctions. Here we report that Rac1 associates with the ubiquitin-protein ligase neural precursor cell expressed developmentally down-regulated 4 (Nedd4). This interaction requires the hypervariable C-terminal domain of Rac1 and the WW domains of Nedd4. Activated Rac1 colocalises with endogenous Nedd4 at epithelial cell-cell contacts. Reduction of Nedd4 expression by shRNA results in reduced transepithelial electrical resistance (TER) and concomitant changes in the distribution of adherens and tight junction markers. Conversely, expression of Nedd4 promotes TER, suggesting that Nedd4 cooperates with Rac1 in the induction of junctional maturation. We found that Nedd4, but not Nedd4-2, mediates the ubiquitylation and degradation of the adapter protein dishevelled-1 (Dvl1), the expression of which negatively regulates cell-cell contact. Nedd4-mediated ubiquitylation requires its binding to the C-terminal domain of Dvl1, comprising the DEP domain, and targets an N-terminal lysine-rich region upstream of the Dvl1 DIX domain. We found that endogenous Rac1 colocalises with endogenous Dvl1 in intracellular puncta as well as on cell-cell junctions. Finally, activated Rac1 was found to stimulate Nedd4 activity, resulting in increased ubiquitylation of Dvl1. Together, these data reveal a novel Rac1-dependent signalling pathway that, through Nedd4-mediated ubiquitylation of Dvl1, stimulates the maturation of epithelial cell-cell contacts.