We have developed an efficient expression cloning system that allows rapid isolation of complementary DNAs able to induce the transformed phenotype. We searched for molecules expressed in epithelial cells and possessing transforming potential to fibroblasts, and cloned a cDNA for the normal receptor of a growth factor secreted by NIH/3T3 cells. Here we report a second novel transforming gene, ect2. The isolated cDNA is activated by amino-terminal truncation of the normal product. The Ect2 protein has sequence similarity within a central core of 255 amino acids with the products of the breakpoint cluster gene, bcr (ref. 5), the yeast cell cycle gene, CDC24 (ref. 6), and the dbl oncogene. Each of these genes encodes regulatory molecules or effectors for Rho-like small GTP-binding proteins. The baculovirus-expressed Ect2 protein could bind highly specifically to Rho and Rac proteins, whereas the dbl product showed broader binding specificity to Rho family proteins. Thus ect2 is a new member of an expanding family, whose products have transforming properties and interact with Rho-like proteins of the Ras superfamily.