FGD1, the gene responsible for the inherited disease faciogenital dysplasia, encodes a guanine nucleotide exchange factor (GEF) that specifically activates the p21 GTPase Cdc42. In order, FGD1 is composed of a proline-rich N-terminal region, adjacent GEF and pleckstrin homology (PH) domains, a FYVE-finger domain and a second C-terminal PH domain (PH2), structural motifs involved in signaling and subcellular localization. Fgd1, the mouse FGD1 ortholog, is expressed in regions of active bone formation within osteoblasts and in the osteoblast-like cell line MC3T3-E1, a finding consistent with its role in skeletal formation. Here, we use subcellular fractionation studies to show that endogenous Fgd1 protein is localized in the cytosolic and Golgi and plasma membrane fractions of mouse calvarial cells. Immunocytochemical studies performed with osteoblast-like MC3T3-E1 cells and other mammalian cell lines confirm the localization of Fgd1 and show that the proline-rich N-terminal region is necessary and sufficient for Fgd1 subcellular localization to the plasma membrane and Golgi complex. In contrast, the FYVE-finger and PH2 domains do not appear to direct the localization of Fgd1 or the activation of Cdc42. In addition, microinjection studies indicate that the N-terminal Fgd1 domain inhibits filopodia formation, suggesting that this region down-regulates GEF function. These results characterize the function of the Fgd1 domains for both protein localization and Cdc42 activation and indicate that the Fgd1 Cdc42GEF protein is involved in the regulation of Cdc42 activity at the subcortical actin cytoskeleton and Golgi complex.