The biological activities of Rho family GTPases are controlled by their guanine nucleotide binding states in cells. Here we have investigated the role of Mg(2+) cofactor in the guanine nucleotide binding and hydrolysis processes of the Rho family members, Cdc42, Rac1, and RhoA. Differing from Ras and Rab proteins, which require Mg(2+) for GDP and GTP binding, the Rho GTPases bind the nucleotides in the presence or absence of Mg(2+) similarly, with dissociation constants in the submicromolar concentration. The presence of Mg(2+), however, resulted in a marked decrease in the intrinsic dissociation rates of the nucleotides. The catalytic activity of the guanine nucleotide exchange factors (GEFs) appeared to be negatively regulated by free Mg(2+), and GEF binding to Rho GTPase resulted in a 10-fold decrease in affinity for Mg(2+), suggesting that one role of GEF is to displace bound Mg(2+) from the Rho proteins. The GDP dissociation rates of the GTPases could be further stimulated by GEF upon removal of bound Mg(2+), indicating that the GEF-catalyzed nucleotide exchange involves a Mg(2+)-independent as well as a Mg(2+)-dependent mechanism. Although Mg(2+) is not absolutely required for GTP hydrolysis by the Rho GTPases, the divalent ion apparently participates in the GTPase reaction, since the intrinsic GTP hydrolysis rates were enhanced 4-10-fold upon binding to Mg(2+), and k(cat) values of the Rho GTPase-activating protein (RhoGAP)-catalyzed reactions were significantly increased when Mg(2+) was present. Furthermore, the p50RhoGAP specificity for Cdc42 was lost in the absence of Mg(2+) cofactor. These studies directly demonstrate a role of Mg(2+) in regulating the kinetics of nucleotide binding and hydrolysis and in the GEF- and GAP-catalyzed reactions of Rho family GTPases. The results suggest that GEF facilitates nucleotide exchange by destabilizing both bound nucleotide and Mg(2+), whereas RhoGAP utilizes the Mg(2+) cofactor to achieve high catalytic efficiency and specificity.