In yeast and animal cytokinesis, the small guanosine triphosphatase (GTPase) Rho1/RhoA has an established role in formation of the contractile actomyosin ring, but its role, if any, during cleavage-furrow ingression and abscission is poorly understood. Through genetic screens in yeast, we found that either activation of Rho1 or inactivation of another small GTPase, Cdc42, promoted secondary septum (SS) formation, which appeared to be responsible for abscission. Consistent with this hypothesis, a dominant-negative Rho1 inhibited SS formation but not cleavage-furrow ingression or the concomitant actomyosin ring constriction. Moreover, Rho1 is temporarily inactivated during cleavage-furrow ingression; this inactivation requires the protein Cyk3, which binds Rho1-guanosine diphosphate via its catalytically inactive transglutaminase-like domain. Thus, unlike the active transglutaminases that activate RhoA, the multidomain protein Cyk3 appears to inhibit activation of Rho1 (and thus SS formation), while simultaneously promoting cleavage-furrow ingression through primary septum formation. This work suggests a general role for the catalytically inactive transglutaminases of fungi and animals, some of which have previously been implicated in cytokinesis.