Engraftment and maintenance of hematopoietic stem and progenitor cells (HSPC) depend on their ability to respond to extracellular signals from the bone marrow microenvironment, but the critical intracellular pathways integrating these signals remain poorly understood. Furthermore, recent studies provide contradictory evidence of the roles of vascular versus osteoblastic niche components in HSPC function. To address these questions and to dissect the complex upstream regulation of Rac GTPase activity in HSPC, we investigated the role of the hematopoietic-specific guanine nucleotide exchange factor Vav1 in HSPC localization and engraftment. Using intravital microscopy assays, we demonstrated that transplanted Vav1(-/-) HSPC showed impaired early localization near nestin(+) perivascular mesenchymal stem cells; only 6.25% of Vav1(-/-) HSPC versus 45.8% of wild-type HSPC were located less than 30 μm from a nestin(+) cell. Abnormal perivascular localization correlated with decreased retention of Vav1(-/-) HSPC in the bone marrow (44-60% reduction at 48 h posttransplant, compared with wild-type) and a very significant defect in short- and long-term engraftment in competitive and noncompetitive repopulation assays (<1.5% chimerism of Vav1(-/-) cells vs. 53-63% for wild-type cells). The engraftment defect of Vav1(-/-) HSPC was not related to alterations in proliferation, survival, or integrin-mediated adhesion. However, Vav1(-/-) HSPC showed impaired responses to SDF1α, including reduced in vitro migration in time-lapse microscopy assays, decreased circadian and pharmacologically induced mobilization in vivo, and dysregulated Rac/Cdc42 activation. These data suggest that Vav1 activity is required specifically for SDF1α-dependent perivascular homing of HSPC and suggest a critical role for this localization in retention and subsequent engraftment.