We report the isolation and cloning of the Wrch-1 (Wnt-1 responsive Cdc42 homolog) cDNA. Wrch-1 is a novel gene whose mRNA level increases in response to Wnt-1 signaling in Wnt-1 transformed cells, Wnt-1 transgene induced mouse mammary tumors, and Wnt-1 retrovirus infected cells. Wrch-1 encodes a homolog of the Rho family of GTPases. It shares 57% amino acid sequence identity with Cdc42, but possesses a unique N-terminal domain that contains several putative PXXP SH3-binding motifs. Like Cdc42, Wrch-1 can activate PAK-1 and JNK-1, and induce filopodium formation and stress fiber dissolution. Active Wrch-1 stimulates quiescent cells to reenter the cell cycle. Moreover, overexpression of Wrch-1 phenocopies Wnt-1 in morphological transformation of mouse mammary epithelial cells. Taken together, Wrch-1 could mediate the effects of Wnt-1 signaling in the regulation of cell morphology, cytoskeletal organization, and cell proliferation.