The small GTPases of the Rho family comprising RhoA, Rac1 and Cdc42 function as molecular switches controlling several essential biochemical pathways in eukaryotic cells. Their activity is cycling between an active GTP-bound and an inactive GDP-bound conformation. The exchange of GDP to GTP is catalyzed by guanine nucleotide exchange factors (GEFs). Here we report a novel regulatory mechanism of Rac1 activity, which is controlled by a phosphomimetic (Ser179Glu) mutant of syndecan-4 (SDC4). SDC4 is a ubiquitously expressed transmembrane, heparan sulfate proteoglycan. In this study we show that the Ser179Glu mutant binds strongly Tiam1, a Rac1-GEF reducing Rac1-GTP by 3-fold in MCF-7 breast adenocarcinoma cells. Mutational analysis unravels the PDZ interaction between SDC4 and Tiam1 is indispensable for the suppression of the Rac1 activity. Neither of the SDC4 interactions is effective alone to block the Rac1 activity, on the contrary, lack of either of interactions can increase the activity of Rac1, therefore the Rac1 activity is the resultant of the inhibitory and stimulatory effects. In addition, SDC4 can bind and tether RhoGDI1 (GDP-dissociation inhibitor 1) to the membrane. Expression of the phosphomimetic SDC4 results in the accumulation of the Rac1-RhoGDI1 complex. Co-immunoprecipitation assays (co-IP-s) reveal that SDC4 can form complexes with RhoGDI1. Together, the regulation of the basal activity of Rac1 is fine tuned and SDC4 is implicated in multiple ways.