The Rho family GTPases are stringently regulated through the action of a large family of GTPase activating proteins (GAPs) that stimulate their relatively weak intrinsic GTP hydrolyzing activity. The p190RhoGAPs, which include the p190A and p190B proteins, are potent and widely expressed GAPs acting on both Rho and Rac GTPases. We have observed that several acidic phospholipids inhibit the RhoGAP activity and promote the RacGAP activity of p190 proteins. In liposome binding assays we have demonstrated that binding of p190A to phospholipids is controlled by electrostatic interactions. Using mapping techniques, we determined that a small polybasic peptide stretch within p190A is a common site for both the phospholipid binding and PKC phosphorylation. Moreover, PKC-mediated phosphorylation of two amino acids (serine-1221 and threonine-1226) within this region of p190A prevents the binding and substrate specificity regulation by phospholipids. Transfection of COS-7 cells with mutant forms of p190A either unable to bind to phospholipids or unable to become phosphorylated induced distinct morphological changes. Together, these findings reveal a novel GAP regulatory mechanism in which phosphorylation indirectly alters GTPase substrate preference by affecting the interaction with acidic phospholipids. Our observations provide a potential mechanism of Rac/Rho antagonism described in several cellular functions.