The small GTPase Rho induces the formation of actin stress fibres and mediates the formation of diverse actin structures. However, it remains unclear how Rho regulates its effectors to elicit such functions. Here we show that GTP-bound Rho activates its effector mDia1 by disrupting mDia1's intramolecular interactions. Active mDia1 induces the formation of thin actin stress fibres, which are disorganized in the absence of activity of the Rho-associated kinase ROCK. Moreover, active mDia1 transforms ROCK-induced condensed actin fibres into structures reminiscent of Rho-induced stress fibres. Thus mDia1 and ROCK work concurrently during Rho-induced stress-fibre formation. Intriguingly, mDia1 and ROCK, depending on the balance of the two activities, induce actin fibres of various thicknesses and densities. Thus Rho may induce the formation of different actin structures affected by the balance between mDia1 and ROCK signalling.