Cellular signaling by small GTPases is critically dependent on proper spatio-temporal orchestration of activation and output. In addition to their core G (guanine nucleotide binding)-domain, small GTPases comprise a hypervariable region (HVR) and a lipid anchor that are generally accepted to control subcellullar localization. The HVR encodes in many small GTPases a polybasic region (PBR) that permits charge-mediated association to the inner leaflet of the plasma membrane or to intracellular organelles. Over the past 15–20 years, evidence has accumulated for specific protein–protein interactions, mediated by the HVR, that control both targeting and signaling specificity of small GTPases. Using the RhoGTPase Rac1 as a paradigm we here review a series of protein partners that require the Rac1 HVR for association and that control various aspects of localized Rac1 signaling. Some of these proteins represent Rac1 activators, whereas others mediate Rac1 inactivation and degradation and yet others potentiate Rac1 downstream signaling. Finally, evidence is discussed which shows that the HVR of Rac1 also contributes to effector interactions, co-operating with the N-terminal effector domain. The complexity of localized Rac1 signaling, reviewed here, is most likely exemplary for many other small GTPases as well, representing a challenge to identify and define similar mechanisms controlling the specific signaling induced by small GTPases.