The GDP dissociation inhibitors (GDIs) represent an important class of regulatory proteins for the Rho- and Rab-subtype GTP-binding proteins. As a first step toward identifying the key functional domain(s) on the Rho-subtype GDI, truncations of the amino and carboxyl termini were performed. Deletion of the final four amino acids from the carboxyl terminus of Rho GDI or the removal of 25 amino acids from the amino terminus had no significant effect on the ability of the GDI to inhibit GDP dissociation from the Rho-like protein Cdc42Hs or on its ability to release Cdc42Hs from membrane bilayers. However, the deletion of 8 amino acids from the carboxyl terminus of Rho GDI eliminated both activities. To further test the importance of the carboxyl-terminal domain of the Rho GDI molecule, chimeras were constructed between this GDI and a related protein designated LD4, which is 67% identical to Rho GDI but is less potent by a factor of 10-20 than Rho GDI in functional assays with the Cdc42Hs protein. Two sets of chimeras were constructed that together indicated that as few as 6 amino acids near the carboxyl terminus of Rho GDI could impart full GDP dissociation inhibition and membrane dissociation activities on the LD4 molecule. Further analysis of this region by site-directed mutagenesis showed that a single change at residue 174 of LD4 to the corresponding residue of Rho GDI (i.e., Asp-174-->Ile) could impart nearly full (70%) Rho GDI activity on the LD4 molecule.