A novel splice variant of Rac1, designated Rac1b, is expressed in human breast and colon carcinoma cells. Rac1b contains an additional 19 amino-acid insert immediately behind the switch II domain, a region important for Rac1 interaction with regulators and effectors. Recent studies showed that Rac1b exhibited the biochemical properties of a constitutively activated GTPase, yet it showed impaired interaction with downstream effectors, suggesting that Rac1b may be defective in biological activity. Whether Rac1b is a biologically active protein was not addressed. Therefore, we evaluated the biochemical, signaling and growth-promoting properties of authentic Rac1b. Similar to previous observations, we found that Rac1b showed enhanced intrinsic guanine nucleotide exchange activity, impaired intrinsic GTPase activity, and failed to interact with RhoGDI. Surprisingly, we found that Rac1b, like the constitutively-activated and transforming Rac1(Q61L) mutant, promoted growth transformation of NIH3T3 cells. Rac1b-expressing cells also showed a loss of density-dependent and anchorage-dependent growth. Surprisingly, unlike activated Rac1(61L), Rac1b did not show enhanced activation of the nuclear factor kappaB (NF-kappaB) transcription factor or stimulate cyclin D1 expression, the signaling activities that best correlate with Rac1 transforming activity. However, Rac1b did promote activation of the AKT serine/threonine kinase. Therefore, we suggest that Rac1b selectively activates a subset of Rac1 downstream signaling pathways to facilitate cellular transformation.