Phospholipase C-beta (PLCbeta) isozymes play important roles in transmembrane signaling. Their activity is regulated by heterotrimeric G proteins. The PLCbeta(2) isozyme is unique in being stimulated also by Rho GTPases (Rac and Cdc42). However, the mechanism(s) of this stimulation are still unclear. Here, we employed fluorescence recovery after photobleaching to investigate the interaction of green fluorescent protein (GFP)-PLCbeta(2) with the plasma membrane. For either GFP-PLCbeta(2) or GFP-PLCbeta(2)Delta, a C-terminal deletion mutant lacking the region required for stimulation by Galpha(q), these interactions were characterized by a mixture of exchange with a cytoplasmic pool and lateral diffusion. Constitutively active Rac2(12V) stimulated the activity of both GFP-PLCbeta(2) and GFP-PLCbeta(2)Delta in live cells, and enhanced their membrane association as evidenced by the marked reduction in their fluorescence recovery rates. Both effects required the putative N-terminal pleckstrin homology (PH) domain of PLCbeta(2). Importantly, Rac2(12V) dramatically increased the contribution of exchange to the fluorescence recovery of GFP-PLCbeta(2), but had the opposite effect on GFP-PLCbeta(2)Delta, where lateral diffusion became dominant. Our results demonstrate for the first time the regulation of membrane association of a PLCbeta isozyme by a GTP-binding protein and assign a novel function to the PLCbeta(2) C-terminal region, regulating its exchange between membrane-bound and cytosolic states.