Ezrin, a membrane cytoskeleton linker, is involved in cellular functions, including epithelial cell morphogenesis and adhesion. A mutant form of ezrin, ezrin T567D, maintains the protein in an open conformation, which when expressed in Madin-Darby canine kidney cells causes extensive formation of lamellipodia and altered cell-cell contacts at low cell density. Furthermore, these cells do not form tubules when grown in a collagen type I matrix. While measuring the activity of Rho family GTPases, we found that Rac1, but not RhoA or Cdc 42, is activated in ezrin T567D-expressing cells, compared with cells expressing wild-type ezrin. Together with Rac1 activation, we observed an accumulation of E-cadherin in intracellular compartments and a concomitant decrease in the level of E-cadherin present at the plasma membrane. This effect could be reversed with a dominant negative form of Rac1, N17Rac1. We show that after a calcium switch, the delivery of E-cadherin from an internalized pool to the plasma membrane is greatly delayed in ezrin T567D-producing cells. In confluent cells, ezrin T567D production decreases the rate of E-cadherin internalization. Our results identify a new role for ezrin in cell adhesion through the activation of the GTPase Rac1 and the trafficking of E-cadherin to the plasma membrane.