Rab GTPases serve as multifaceted organizers during vesicle trafficking. Rab7, a member of the Rab GTPase family, has been shown to perform various essential functions in endosome trafficking and in endosome-to-lysosome trafficking in mammalian systems. The Arabidopsis thaliana genome encodes eight putative Rab7 homologs; however, the detailed function and activation mechanism of Rab7 in plants remain unknown. Here, we demonstrate that Arabidopsis RABG3f, a member of the plant Rab7 small GTPase family, localizes to prevacuolar compartments (PVCs) and the tonoplast. The proper activation of Rab7 is essential for both PVC-to-vacuole trafficking and vacuole biogenesis. Expression of a dominant-negative Rab7 mutant (RABG3f(T22N)) induces the formation of enlarged PVCs and affects vacuole morphology in plant cells. We also identify Arabidopsis MON1 (MONENSIN SENSITIVITY1) and CCZ1 (CALCIUM CAFFEINE ZINC SENSITIVITY1) proteins as a dimeric complex that functions as the Rab7 guanine nucleotide exchange factor. The MON1-CCZ1 complex also serves as the Rab5 effector to mediate Rab5-to-Rab7 conversion on PVCs. Loss of functional MON1 causes the formation of enlarged Rab5-positive PVCs that are separated from Rab7-positive endosomes. Similar to the dominant-negative Rab7 mutant, the mon1 mutants show pleiotropic growth defects, fragmented vacuoles, and altered vacuolar trafficking. Thus, Rab7 activation by the MON1-CCZ1 complex is critical for vacuolar trafficking, vacuole biogenesis, and plant growth.