Rho-family GTPases regulate cytoskeletal dynamics in various cell types. p21-activated kinase 1 (PAK1) is one of the downstream effectors of Rac and Cdc42 which has been implicated as a mediator of polarized cytoskeletal changes in fibroblasts. We show here that the extension of neurites induced by nerve growth factor (NGF) in the neuronal cell line PC12 is inhibited by dominant-negative Rac2 and Cdc42, indicating that these GTPases are required components of the NGF signaling pathway. While cytoplasmically expressed PAK1 constructs do not cause efficient neurite outgrowth from PC12 cells, targeting of these constructs to the plasma membrane via a C-terminal isoprenylation sequence induced PC12 cells to extend neurites similar to those stimulated by NGF. This effect was independent of PAK1 ser/thr kinase activity but was dependent on structural domains within both the N- and C-terminal portions of the molecule. Using these regions of PAK1 as dominant-negative inhibitors, we were able to effectively inhibit normal neurite outgrowth stimulated by NGF. Taken together with the requirement for Rac and Cdc42 in neurite outgrowth, these data suggest that PAK(s) may be acting downstream of these GTPases in a signaling system which drives polarized outgrowth of the actin cytoskeleton in the developing neurite.