Nine diacylglycerol kinase (DGK) isozymes have been identified. However, our knowledge of their individual functions is still limited. Here, we demonstrate the role of DGKgamma in regulating Rac1-governed cell morphology. We found that the expression of kinase-dead DGKgamma, which acts as a dominant-negative mutant, and inhibition of endogenous DGKgamma activity with R59949 induced lamellipodium and membrane ruffle formation in NIH3T3 fibroblasts in the absence of growth factor stimulation. Reciprocally, lamellipodium formation induced by platelet-derived growth factor was significantly inhibited upon expression of constitutively active DGKgamma. Moreover, the constitutively active DGKgamma mutant suppressed integrin-mediated cell spreading. These effects are isoform-specific because, in the same experiments, none of the corresponding mutants of DGKalpha and DGKbeta, closely related isoforms, affected cell morphology. These results suggest that DGKgamma specifically participates in the Rac1-mediated signaling pathway leading to cytoskeletal reorganization. In support of this, DGKgamma co-localized with dominant-active Rac1 especially in lamellipodia. Moreover, we found that endogenous DGKgamma was physically associated with cellular Rac1. Dominant-negative Rac1 expression blocked the lamellipodium formation induced by kinase-dead DGKgamma, indicating that DGKgamma acts upstream of Rac1. This model is supported by studies demonstrating that kinase-dead DGKgamma selectively activated Rac1, but not Cdc42. Taken together, these results strongly suggest that DGKgamma functions through its catalytic action as an upstream suppressor of Rac1 and, consequently, lamellipodium/ruffle formation.