The molecular events that regulate engraftment and mobilization of hematopoietic stem cells and progenitors (HSC/Ps) are still incompletely defined. We have examined the role of the Rho GTPases Rac1 and Rac2 in HSC engraftment and mobilization. Rac1, but not the hematopoietic-specific Rac2, is required for the engraftment phase of hematopoietic reconstitution, because Rac1(-/-) HSCs did not rescue in vivo hematopoiesis after transplantation, but deletion of Rac1 after engraftment did not impair steady-state hematopoiesis. Rac1(-/-) HSC/Ps showed impaired spatial localization to the endosteum but near-normal homing to the medullary cavity in vivo. Interaction with the bone marrow microenvironment in vitro was markedly altered. Whereas post-engraftment deletion of Rac1 alone did not impair hematopoiesis, deficiency of both Rac1 and Rac2 led to massive mobilization of HSCs from the marrow associated with ineffective hematopoiesis and intense selection for Rac-expressing HSCs. This mobilization was reversible by re-expression of Rac1. In addition, a rationally designed, reversible small-molecule inhibitor of Rac activation led to transient mobilization of engraftable HSC/Ps. Rac proteins thus differentially regulate engraftment and mobilization phenotypes, suggesting that these biological processes and steady-state hematopoiesis are biochemically separable and that Rac proteins may be important molecular targets for stem cell modification.