The abilities of the M3muscarinic acetylcholine receptor (mAChR) and Rac1 to regulate similar cellular responses, including cadherin-mediated adhesion, prompted us to investigate Rac1 regulation by M3mAChR. We characterized changes in Rac1 induced by stimulating transfected M3mAChR in Chinese hamster ovary cells stably expressing hemagglutinin (HA)-tagged wild-type or mutant Rac1. mAChR activation converts endogenous Rac1 to the GTP-bound form in cells expressing HA-Rac1 but not in cells expressing dominant negative HA-Rac1Asn-17or constitutively active HA-Rac1Val-12. The competitive binding of endogenous IQGAP1 by HA-Rac1Val-12may diminish the mAChR-mediated activation of endogenous Rac1. HA-Rac1 and HA-Rac1Val-12, but not HA-Rac1Asn-17, accumulate with IQGAP1 at cell junctions during mAChR-induced cell-cell compaction. Co-localization studies suggest that Rac1 can accumulate at junctions without IQGAP1, but IQGAP1 cannot accumulate at junctions without Rac1. mAChR activation also induces GTP-independent changes in Rac1 because mAChR activation redistributes HA-Rac1Asn-17, which does not bind GTP. Actin associates with complexes containing HA-Rac1 or HA-Rac1Val-12after prolonged mAChR activation. We also demonstrate that Rac1 participates in mAChR-induced cell-cell compaction and c-Jun phosphorylation. These results indicate that M3mAChR activation converts Rac1 to the GTP-bound form, alters interactions between Rac1, IQGAP1, and actin, and causes the junctional accumulation of Rac1 and IQGAP1.