Accumulating evidence suggests that Rho family GTPases play critical roles in the organization of the nervous system. We previously identified a guanine nucleotide exchange factor of Rac1, STEF (SIF and Tiam 1-like exchange factor), which can induce ruffling membrane in KB cells and is predominantly expressed in the brain during development. Here, we characterize the molecular nature of STEF and its involvement in neurite growth. Deletion analyses revealed distinct roles for individual domains: PHnTSS for membrane association, DH for enzymatic activity, and PHc for promoting catalytic activity. Ectopic expression of STEF in N1E-115 neuroblastoma cells induced neurite-like processes containing F-actin, betaIII tubulin, MAP2, and GAP43 in a Rac1-dependent manner even under the serum-containing neurite-inhibiting conditions. We further found that a PHnTSS STEF fragment specifically inhibited the function of both STEF and Tiam1, a closely related Rac1 guanine nucleotide exchange factor. Suppression of endogenous STEF and Tiam1 activities in N1E-115 cells by ectopically expressed PHnTSS STEF resulted in inhibition of neurite outgrowth in serum-starved conditions, which usually induce neurite formation. Furthermore, these inhibitory effects were rescued by exogenously expressed STEF or Tiam1, suggesting that STEF and Tiam1 are involved in neurite formation through the activation of Rac1 and successive cytoskeletal reorganization of neuronal cells during development.