Rab GDP dissociation inhibitors (GDI)-facilitated extraction of prenylated Rab proteins from membranes plays an important role in vesicular membrane trafficking. The investigated thermodynamic properties of yeast Rab.GDI and Rab.MRS6 complexes demonstrated differences in the Rab binding properties of the closely related Rab GDI and MRS6 proteins, consistent with their functional diversity. The importance of the Rab C terminus and its prenylation for GDI/MRS6 binding was demonstrated using both biochemical and structural data. The presented structures of the apo-form yeast Rab GDI and its two complexes with unprenylated Rab proteins, together with the earlier published structures of the prenylated Ypt1.GDI, provide evidence of allosteric regulation of the GDI lipid binding site opening, which plays a key role in the proposed mechanism of GDI-mediated Rab extraction. We suggest a model for the interaction of GDI with prenylated Rab proteins that incorporates a stepwise increase in affinity as the three different partial interactions are successively formed.