Rac GTPases are involved in the regulation of multiple cell functions and have been implicated in the pathology of certain human diseases. Dominant negative mutants of Rac have been the tool of choice in studying Rac function in cells. Given the difficulty of introducing high concentrations of the Rac mutants into primary cells and nonspecific effects of the mutants on Rho guanine nucleotide exchange factor (GEF) activities, it is desirable to develop small molecule inhibitors that could specifically inhibit Rac activities. Here we describe the rational design, characterization, and applications of a first-generation Rac-specific small molecule inhibitor. On the basis of the structure-function information of Rac interaction with GEFs, in a computer-based virtual screening we have identified NSC23766, a highly soluble and membrane permeable compound, as a specific inhibitor of a subset of GEF binding to Rac and, therefore, Rac activation by these GEFs. In fibroblast cells, NSC23766 inhibited Rac1 GTP-loading without affecting Cdc42 or RhoA activity and suppressed cell proliferation induced by a Rac GEF Tiam1. It has little effect on cell growth induced by a constitutively active Rac1 mutant. In addition, NSC23766 inhibited: (1) the anchorage-independent growth and invasion phenotypes of human prostate cancer PC-3 cells; (2) Rac activation and Rac-dependent aggregation of platelets stimulated by thrombin; and (3) Rac1 and Rac2 activities of hematopoietic stem/progenitor cells and induced their mobilization from mouse bone marrow to peripheral blood. Thus, NSC23766 is a lead small molecule inhibitor of Rac activity and could be useful for studying Rac-mediated cellular functions and for modulating pathological conditions in which Rac-deregulation may play a role.