Previous work showed that the GTP-binding protein Rho1p is required in the yeast, Saccharomyces cerevisiae, for activation of protein kinase C (Pkc1p) and for activity and regulation of beta(1-->3)glucan synthase. Here we demonstrate a hitherto unknown function of Rho1p required for cell cycle progression and cell polarization. Cells of mutant rho1(E45I) in the G1 stage of the cell cycle did not bud at 37 degrees C. In those cells actin reorganization and recruitment to the presumptive budding site did not take place at the nonpermissive temperature. Two mutants in adjacent amino acids, rho1(V43T) and rho1(F44Y), showed a similar behavior, although some budding and actin polarization occurred at the nonpermissive temperature. This was also the case for rho1(E45I) when placed in a different genetic background. Cdc42p and Spa2p, two proteins that normally also move to the bud site in a process independent from actin organization, failed to localize properly in rho1(E45I). Nuclear division did not occur in the mutant at 37 degrees C, although replication of DNA proceeded slowly. The rho1 mutants were also defective in the formation of mating projections and in congregation of actin at the projections in the presence of mating pheromone. The in vitro activity of beta(1-->3)glucan synthase in rho1 (E45I), although diminished at 37 degrees C, appeared sufficient for normal in vivo function and the budding defect was not suppressed by expression of a constitutively active allele of PKC1. Reciprocally, when Pkc1p function was eliminated by the use of a temperature-sensitive mutation and beta(1-->3)glucan synthesis abolished by an echinocandin-like inhibitor, a strain carrying a wild-type RHO1 allele was able to produce incipient buds. Taken together, these results reveal a novel function of Rho1p that must be executed in order for the yeast cell to polarize.