CDC42 encodes a highly conserved GTPase of the Rho family that is best known for its role in regulating cell polarity and actin organization. In addition, various studies of both yeast and mammalian cells have suggested that Cdc42p, through its interaction with p21-activated kinases (PAKs), plays a role in signaling pathways that regulate target gene transcription. However, recent studies of the yeast pheromone response pathway suggested that prior results with temperature-sensitive cdc42 mutants were misleading and that Cdc42p and the Cdc42p-PAK interaction are not involved in signaling. To clarify this issue, we have identified and characterized novel viable pheromone-resistant cdc42 alleles that retain the ability to perform polarity-related functions. Mutation of the Cdc42p residue Val36 or Tyr40 caused defects in pheromone signaling and in the localization of the Ste20p PAK in vivo and affected binding to the Ste20p Cdc42p-Rac interactive binding (CRIB) domain in vitro. Epistasis analysis suggested that they affect the signaling step at which Ste20p acts, and overproduction of Ste20p rescued the defect. These results suggest that Cdc42p is in fact required for pheromone response and that interaction with the PAK Ste20p is critical for that role. Furthermore, the ste20DeltaCRIB allele, previously used to disrupt the Cdc42p-Ste20p interaction, behaved as an activated allele, largely bypassing the signaling defect of the cdc42 mutants. Additional observations lead us to suggest that Cdc42p collaborates with the SH3-domain protein Bem1p to facilitate signal transduction, possibly by providing a cell surface scaffold that aids in the local concentration of signaling kinases, thus promoting activation of a mitogen-activated protein kinase cascade by Ste20p.