Rho proteins cycle between an inactive, GDP-bound state and an active, GTP-bound state. Activation of these GTPases is mediated by guanine nucleotide exchange factors (GEFs), which promote GDP to GTP exchange. In this study we have characterized XPLN, a Rho family GEF. Like other Rho GEFs, XPLN contains a tandem Dbl homology and pleckstrin homology domain topography, but lacks homology with other known functional domains or motifs. XPLN protein is expressed in the brain, skeletal muscle, heart, kidney, platelets, and macrophage and neuronal cell lines. In vitro, XPLN stimulates guanine nucleotide exchange on RhoA and RhoB, but not RhoC, RhoG, Rac1, or Cdc42. Consistent with these data, XPLN preferentially associates with RhoA and RhoB. The specificity of XPLN for RhoA and RhoB, but not RhoC, is surprising given that they share over 85% sequence identity. We determined that the inability of XPLN to exchange RhoC is mediated by isoleucine 43 in RhoC, a position occupied by valine in RhoA and RhoB. When expressed in cells, XPLN activates RhoA and RhoB, but not RhoC, and stimulates the assembly of stress fibers and focal adhesions in a Rho kinase-dependent manner. We also found that XPLN possesses transforming activity, as determined by focus formation assays. In conclusion, here we describe a Rho family GEF that can discriminate between the closely related RhoA, RhoB, and RhoC, possibly giving insight to the divergent functions of these three proteins.