The small GTPase Rho3 is conserved in fungi and plays a key role in the control of cell polarity and exocytosis in yeast. In this report, we show that a Rho3 homolog, MgRho3, is dispensable for polarized hyphal growth in the rice blast fungus Magnaporthe grisea. However, MgRho3 is required for plant infection. Appressoria formed by the Mgrho3 deletion mutants are morphologically abnormal and defective in plant penetration. Conidia of the Mgrho3 deletion mutants are narrower than those of the wild-type strain and delayed in germination. Transformants expressing a dominant negative Mgrho3 allele exhibit similar phenotypes as the Mgrho3 deletion mutant, while transformants expressing a constitutively active allele of MgRho3 can produce normal conidia but remain defective in appressorium formation and plant infection. In contrast, overexpression of wild-type MgRho3 increases the infectivity of M. grisea. Our results reveal a new role for the conserved Rho3 as a critical regulator of developmental processes and pathogenicity of M. grisea.