Regulation of cell proliferation and motility is essential for normal development. The Rho family of GTPases plays a critical role in the control of cell polarity and migration by effecting the cytoskeleton, membrane trafficking, and cell adhesion. We investigated a recognized developmental disorder, Adams-Oliver syndrome (AOS), characterized by the combination of aplasia cutis congenita (ACC) and terminal transverse limb defects (TTLD). Through a genome-wide linkage analysis, we detected a locus for autosomal-dominant ACC-TTLD on 3q generating a maximum LOD score of 4.93 at marker rs1464311. Candidate-gene- and exome-based sequencing led to the identification of independent premature truncating mutations in the terminal exon of the Rho GTPase-activating protein 31 gene, ARHGAP31, which encodes a Cdc42/Rac1 regulatory protein. Mutant transcripts are stable and increase ARHGAP31 activity in vitro through a gain-of-function mechanism. Constitutively active ARHGAP31 mutations result in a loss of available active Cdc42 and consequently disrupt actin cytoskeletal structures. Arhgap31 expression in the mouse is substantially restricted to the terminal limb buds and craniofacial processes during early development; these locations closely mirror the sites of impaired organogenesis that characterize this syndrome. These data identify the requirement for regulated Cdc42 and/or Rac1 signaling processes during early human development.