Pinocytosis and membrane ruffling are among the earliest and most dramatic cellular responses to stimulation by growth factors or other mitogens. The small Ras-related G proteins Rho and Rac have a regulatory role in membrane ruffling and activated Rho has been shown to stimulate pinocytosis when microinjected into Xenopus oocytes. In contrast to these well established effects of Rho and Rac on plasma membrane morphology and bulk pinocytosis, there has been no evidence for their involvement in the regulation of receptor-mediated endocytosis in clathrin-coated pits. Here we show that activated Rho and Rac inhibit transferrin-receptor-mediated endocytosis when expressed in intact cells. Furthermore, we have reconstituted these effects in a cell-free system and established that Rho and Rac can regulate clathrin-coated vesicle formation.