The unconventional guanine nucleotide exchange factor (GEF) family comprising 11 DOCK180 related proteins is classified into four subfamilies, A through D, based on their relative GEF activity toward the closely related Rac and Cdc42 GTPases. DOCK proteins participate in the remodeling of the actin cytoskeleton and are key regulators of cell motility, phagocytosis, and adhesion. Here we show that the guanine nucleotide exchange domain of DOCK7, DHR2 (for DOCK homology region 2), is a potent GEF for prenylated Cdc42 and Rac1 in a model liposome system, demonstrating that the prenylation and membrane localization of Cdc42 or Rac1 are necessary for their activation by DOCK7. Additionally, we identify DOCK7 residues that confer GTPase GEF specificity. Finally, using our liposome reconstitution assay, we show that a more narrowly defined GEF domain of DHR2 (designated DHR2s) harbors an N-terminal site distinct from the GEF active site that binds preferentially to the active, GTP-bound forms of Cdc42 and Rac1 and thereby recruits free DHR2s from solution to the membrane surface. This recruitment results in a progressive increase in the effective concentration of DHR2s at the membrane surface that in turn provides for an accelerated rate of guanine nucleotide exchange on Cdc42. The positive cooperativity observed in our reconstituted system suggests that the action of DOCK7 in vivo may involve the coordinated integration of Cdc42/Rac signaling in the context of the membrane recruitment of a DOCK7 GEF complex.