Proteins of the Rho family control signalling pathways that regulate the actin cytoskeleton and gene transcription. In vitro studies have implicated Rho-like GTP-hydrolysing enzymes (GTPases) in cell migration, cell-cycle progression, and Ras-induced focus formation, suggesting a role for these GTPases in the formation and progression of tumours in vivo. To study this, we have generated mice lacking the Rac-specific activator Tiam1, a T-lymphoma invasion and metastasis inducing protein. Here we show that such Tiam1(-/-) mice are resistant to the development of Ras-induced skin tumours initiated with 7,12-dimethylbenzanthracene and promoted with 12-O-tetradecanoylphorbol-13-acetate. Moreover, the few tumours produced in Tiam1(-/-) mice grew much slower than did tumours in wild-type mice. Tiam1-deficient primary embryonic fibroblasts were also resistant to Ras(V12)-induced focus formation. Analysis of Tiam1 heterozygotes indicated that both tumour initiation and promotion were dependent on the Tiam1 gene dose. Tiam1 deficiency was associated with increased apoptosis during initiation, and with impeded proliferation during promotion. Although the number of tumours in Tiam1(-/-) mice was small, a greater proportion progressed to malignancy, suggesting that Tiam1 deficiency promotes malignant conversion. Our studies identify the Rac activator Tiam1 as a critical regulator of different aspects of Ras-induced tumour formation.