We have studied Rac signal transduction in human cord-blood (CB) and acute myeloid leukemia (AML) CD34+ cells and determined that Rac proteins are critically involved in the interaction between human stem/progenitor cells and stroma. Constitutive activation of Rac signaling was achieved by retroviral introduction of Rac1-V12 into CB-derived CD34+ cells, while inhibition of Rac signaling was established by retroviral introduction of dominant negative Rac1-N17 or by utilizing the Rac inhibitor NSC23766. Inhibition of Rac signaling resulted in a proliferative disadvantage of CB-CD34+ cells when cultured on MS5 stromal cells. Cells were severely disturbed in their migration towards and direct association with MS5 stroma when Rac signaling was inhibited. The Long Term Culture-Initiating Cells (LTC-ICs) migrated underneath the stromal MS5 layer within 24 hrs after plating, and similar results were obtained for about 50% of the Colony Forming Cells (CFCs). However, transient inhibition of Rac signaling for 24–72 hrs resulted in a shift of LTC-ICs and CFCs to the suspension phase as determined by colony assays and CAFC week 5 enumeration. When Rac signaling signal transduction was inhibited during the 5 week coculture period a dramatic decrease in LTC-IC frequency from 0.6% to 0.15% was observed. Many of these phenotypes were reversed in the presence of activated Rac1-V12, including improved migration towards and association with MS5 cells and elevated LTC-IC frequencies. Importantly, in CAFC assays using AML cells (n=8) that were enriched for leukemic stem cells on the basis of a CD34+/CD38low phenotype we observed a dramatic decrease in leukemic CAFC formation as well as strongly diminished clonal expansion in the presence of the Rac inhibitor NSC23766. Taken together, our data indicate that Rac signal transduction is required for the maintenance and expansion of both normal as well as leukemic stem/progenitor cells by mediating their interaction with stromal cells.