Prenylated Rab proteins exist in the cytosol as soluble, high-affinity complexes with GDI that need to be disrupted for membrane attachment and targeting of Rab proteins. The Legionella pneumophila protein DrrA displaces GDI from Rab1:GDI complexes, incorporating Rab1 into Legionella-containing vacuoles and activating Rab1 by exchanging GDP for GTP. Here, we present the crystal structure of a complex between the GEF domain of DrrA and Rab1 and a detailed kinetic analysis of this exchange. DrrA efficiently catalyzes nucleotide exchange and mimics the general nucleotide exchange mechanism of mammalian GEFs for Ras-like GTPases. We show that the GEF activity of DrrA is sufficient to displace prenylated Rab1 from the Rab1:GDI complex. Thus, apparent GDI displacement by DrrA is linked directly to nucleotide exchange, suggesting a basic model for GDI displacement and specificity of Rab localization that does not require discrete GDI displacement activity.