STE20 encodes a protein kinase related to mammalian p65Pak which functions in several signal transduction pathways in yeast, including those involved in pseudohyphal and invasive growth, as well as mating. In addition, Ste20 plays an essential role in cells lacking Cla4, a kinase with significant homology to Ste20. It is not clear how the activity of Ste20 is regulated in response to these different signals in vivo, but it has been demonstrated recently that binding of the small GTP binding protein Cdc42 is able to activate Ste20 in vitro. Here we show that Ste20 functionally interacts with Cdc42 in a GTP-dependent manner in vivo: Ste20 mutants that can no longer bind Cdc42 were unable to restore growth of ste20 cla4 mutant cells. They were also defective for pseudohyphal growth and agar invasion, and displayed reduced mating efficiency when mated with themselves. Surprisingly, however, the kinase activity of such Ste20 mutants was normal when assayed in vitro. Furthermore, these alleles were able to fully activate the MAP kinase pathway triggered by mating pheromones in vivo, suggesting that binding of Cdc42 and Ste20 was not required to activate Ste20. Wild-type Ste20 protein was visualized as a crescent at emerging buds during vegetative growth and at shmoo tips in cells arrested with alpha-factor. In contrast, a Ste20 mutant protein unable to bind Cdc42 was found diffusely throughout the cytoplasm, suggesting that Cdc42 is required to localize Ste20 properly in vivo.