The Rho GTPases mediate actin rearrangements that are likely to be required for the numerous cell shape changes in a developing embryo. In a genetic screen for Rho signaling pathway components in Drosophila, we identified a gene, DRhoGEF2, that encodes a predicted Rho-specific guanine nucleotide exchange factor. Embryos lacking DRhoGEF2 fail to gastrulate due to a defect in cell shape changes required for tissue invagination, and expression of a dominant-negative Rho GTPase in early embryos results in similar defects. Evidence is also presented that DRhoGEF2 mediates these specific cell shape changes in response to the extracellular ligand, Fog. Together, these results establish a Rho-mediated signaling pathway that is essential for the major morphogenetic events in Drosophila gastrulation.