We have discovered that the enzyme phospholipase D2 (PLD2) binds directly to the small GTPase Rac2, resulting in PLD2 functioning as a guanine nucleotide exchange factor (GEF), because it switches Rac2 from the GDP-bound to the GTP-bound states. This effect is large enough to be meaningful (∼72% decrease for GDP dissociation and 300% increase for GTP association, both with PLD2), it has a half-time of ∼7 min, is enhanced with increasing PLD2 concentrations, and compares favorably with other known GEFs, such as Vav-1. The PLD2-Rac2 protein-protein interaction is sufficient for the GEF function, because it can be demonstrated in vitro with just recombinant proteins without lipid substrates, and a catalytically inactive lipase (PLD2-K758R) has GEF activity. Apart from this function, exogenous phosphatidic acid by itself (300 pM) increases GTP binding and enhances PLD2-K758R-mediated GTP binding (by ∼34%) but not GDP dissociation. Regarding the PLD2-Rac2 protein-protein association, it involves, for PLD2, residues 263-266 within a Cdc42/Rac interactive binding region in the PH domain, as well as the PX domain, and it involves, for Rac2, residue N17 within its Switch-1 region. PLD2's GEF function is demonstrated in living cells, because silencing PLD2 results in reduced Rac2 activity, whereas PLD2-initiated Rac2 activation enhances cell adhesion, chemotaxis, and phagocytosis. There are several known GEFs, but we report that this GEF is harbored in a phospholipase. The benefit to the cell is that PLD2 brings spatially separated molecules together in a membrane environment, ready for fast intracellular signaling and cell function.