We demonstrate that Rho, a regulator of cytoskeletal actin, is necessary for Ras transformation. A dominant inhibitory Rho gene (RhoBN19) specifically suppressed Rat1 cell focus formation induced by oncogenic Ras but not by Raf. An activated Rho gene (RhoBV14) lacked focus formation activity but augmented the focus formation activity of both oncogenes. NIH3T3 cell lines expressing RhoBV14 grew to higher saturation density and displayed reduced serum and anchorage requirements for growth. We concluded that Rho played a role in cell growth regulation and was required for transformation by oncogenic Ras but not Raf. A model for Ras signal transduction proposing separate Rho-dependent and Raf-dependent pathways is discussed.