Although receptor-mediated regulation of small G-proteins and the cytoskeleton is intensively studied, the mechanisms for attenuation of these signals are poorly understood. In this study, we have identified the Rac-GAP beta2-chimaerin as an effector of the epidermal growth factor receptor (EGFR) via coupling to phospholipase Cgamma (PLCgamma) and generation of the lipid second messenger diacylglycerol (DAG). EGF redistributes beta2-chimaerin to promote its association with the small GTPase Rac1 at the plasma membrane, as determined by FRET. This relocalization and association with Rac1 were impaired by disruption of the beta2-chimaerin C1 domain as well as by PLCgamma1 RNAi, thus defining beta2-chimaerin as a novel DAG effector. On the other hand, GAP-deficient beta2-chimaerin mutants show enhanced translocation and sustained Rac1 association in the FRET assays. Remarkably, RNAi depletion of beta2-chimaerin significantly extended the duration of Rac activation by EGF, suggesting that beta2-chimaerin serves as a mechanism that self-limits Rac activity in response to EGFR activation. Our results represent the first direct evidence of divergence in DAG signaling downstream of a tyrosine-kinase receptor via a PKC-independent mechanism.