Adult hematopoietic stem cells (HSCs) exist in a relatively quiescent state in the bone marrow (BM) microenvironment to fulfill long-term self-renewal and multilineage differentiation functions, an event that is tightly regulated by extrinsic and intrinsic cues. However, the mechanism coordinating the quiescent state of HSCs and their retention in the BM microenvironment remains poorly understood. In a conditional-knockout mouse model, we show that Cdc42(-/-) HSCs enter the active cell cycle, resulting in significantly increased number and frequency of the stem/progenitor cells in the BM. Cdc42 deficiency also causes impaired adhesion, homing, lodging, and retention of HSCs, leading to massive egress of HSCs from BM to distal organs and peripheral blood and to an engraftment failure. These effects are intrinsic to the HSCs and are associated with deregulated c-Myc, p21(Cip1), beta1-integrin, and N-cadherin expressions and defective actin organization. Thus, Cdc42 is a critical coordinator of HSC quiescence maintenance and interaction with the BM niche.