3-Hydroxy-3-methylglutaryl coenzyme A reductase inhibitors (statins) have been reported to reduce the risk of Alzheimer disease. We have shown previously that statins inhibit a beta-amyloid (Abeta)-mediated inflammatory response through mechanisms independent of cholesterol reduction. Specifically, statins exert anti-inflammatory actions through their ability to prevent the isoprenylation of members of the Rho family of small G-proteins, resulting in the functional inactivation of these G-proteins. We report that statin treatment of microglia results in perturbation of the cytoskeleton and morphological changes due to alteration in Rho family function. Statins also block Abeta-stimulated phagocytosis through inhibition of Rac action. Paradoxically, the statin-mediated inactivation of G-protein function was associated with increased GTP loading of Rac and RhoA, and this effect was observed in myeloid lineage cells and other cell types. Statin treatment disrupted the interaction of Rac with its negative regulator the Rho guanine nucleotide dissociation inhibitor (RhoGDI), an interaction that is dependent on protein isoprenylation. We propose that lack of negative regulation accounts for the increased GTP loading. Isoprenylation of Rac is also required for efficient interaction with the plasma membrane, and we report that statin treatment dramatically reduces the capacity of Rac to interact with membranes. These results suggest a mechanism by which statins inhibit the actions of Rho GTPases and attenuate Abeta-stimulated inflammation.