The Rac-specific GEF (guanine-nucleotide exchange factor) Tiam1 (T-lymphoma invasion and metastasis 1) regulates migration, cell-matrix and cell-cell adhesion by modulating the actin cytoskeleton through the GTPase, Rac1. Using yeast two-hybrid screening and biochemical assays, we found that Tiam1 interacts with the p21-Arc [Arp (actin-related protein) complex] subunit of the Arp2/3 complex. Association occurred through the N-terminal pleckstrin homology domain and the adjacent coiled-coil region of Tiam1. As a result, Tiam1 co-localizes with the Arp2/3 complex at sites of actin polymerization, such as epithelial cell-cell contacts and membrane ruffles. Deletion of the p21-Arc-binding domain in Tiam1 impairs its subcellular localization and capacity to activate Rac1, suggesting that binding to the Arp2/3 complex is important for the function of Tiam1. Indeed, blocking Arp2/3 activation with a WASP (Wiskott-Aldrich syndrome protein) inhibitor leads to subcellular relocalization of Tiam1 and decreased Rac activation. Conversely, functionally active Tiam1, but not a GEF-deficient mutant, promotes activation of the Arp2/3 complex and its association with cytoskeletal components, indicating that Tiam1 and Arp2/3 are mutually dependent for their correct localization and signalling. Our data suggests a model in which the Arp2/3 complex acts as a scaffold to localize Tiam1, and thereby Rac activity, which are both required for activation of the Arp2/3 complex and further Arp2/3 recruitment. This 'self-amplifying' signalling module involving Tiam1, Rac and the Arp2/3 complex could thus drive actin polymerization at specific sites in cells that are required for dynamic morphological changes.