Human cells contain more than 60 small G proteins of the Rab family, which are localized to the surfaces of distinct membrane compartments and regulate transport vesicle formation, motility, docking and fusion. Prenylated Rabs also occur in the cytosol bound to GDI (guanine nucleotide dissociation inhibitor), which binds to Rabs in their inactive state. Prenyl Rab-GDI complexes contain all of the information necessary to direct Rab delivery onto distinct membrane compartments. The late endosomal, prenyl Rab9 binds GDI with very high affinity, which led us to propose that there might be a 'GDI-displacement factor' to catalyse dissociation of Rab-GDI complexes and to enable transfer of Rabs from GDI onto membranes. Indeed, we have previously shown that endosomal membranes contain a proteinaceous factor that can act in this manner. Here we show that the integral membrane protein, Yip3, acts catalytically to dissociate complexes of endosomal Rabs bound to GDI, and to deliver them onto membranes. We propose that the conserved Yip proteins serve as GDI-displacement factors for the targeting of Rab GTPases in eukaryotic cells.