The pleckstrin homology (PH) domain of onco-Dbl, a guanine nucleotide exchange factor (GEF) for Cdc42 and RhoA GTPases, interacts with phosphoinositides (PIPs). This interaction modulates both the GEF activity and the targeting to the plasma membrane of onco-Dbl. Conversely, we have previously shown that in proto-Dbl an intramolecular interaction between the N-terminal domain and the PH domain imposes a negative regulation on both the DH and PH functions, suppressing its transforming activity. Here we have further investigated the mode of regulation of proto-Dbl by generating proto-Dbl mutants deleted of the last C-terminal 50 amino acids, which contain a PEST motif, and/or unable to bind to PIPs due to substitutions of the positively charged residues of the PH domain. The PH mutants of proto-Dbl retained a relative weak GEF activity toward Cdc42 and RhoA in vitro, but their RhoA activating potential was impaired in vivo. Further, these mutants lost both the plasma membrane targeting and the transforming activities, contrary to the PH mutants of onco-Dbl that retained the exchange activity both in vitro and in vivo and showed significant, but partially, reduced transforming activity. Deletion of the C-terminal sequences from onco-Dbl did not affect its function, whereas similar deletion of proto-Dbl led to an increase of transforming activity. Analysis of the half-life of the proto-Dbl mutants revealed that deletion of the C-terminal sequences increases the stability of the protein. Overall, the transformation potential of proto-Dbl mutants was associated with an augmented localization of the protein to the plasma membrane and a strong activation of Jun N-terminal kinase activity and transcription of cyclin D1. Together with previous observations, these data suggest that the biological activity of proto-Dbl is tightly regulated by a combination of mechanisms that involve intramolecular interaction, PH binding to PIPs, and the N- and C-terminal domain-dependent turnover of the protein.