Lipid rafts are cholesterol-rich membrane microdomains that are thought to act as coordinated signaling platforms by regulating dynamic, agonist-induced translocation of signaling proteins. They have been described to play a role in multiple prototypical cascades, among them the lipopolysaccharide pathway, and to host multiple signaling proteins, including kinases and low molecular weight G-proteins. Here we report lipopolysaccharide-induced activation of the Rho family GTPase Cdc42, and we show its activation in the human neutrophil to be mediated by a p38 mitogen-activated protein kinase-dependent mechanism. Subcellular fractionation reveals that lipopolysaccharide induces translocation of Cdc42 to lipid rafts, where it and p38 are both found to be activated. By contrast, lipopolysaccharide causes translocation of Rac from the polymorphonuclear leukocyte (PMN) rafts and does not induce its activation. With the use of methyl-β-cyclodextrin, a cholesterol-depleting agent that reversibly disrupts rafts, we confirm an important regulatory role for rafts in the activation state of p38 and Cdc42 and in the Rho GTPase-dependent functions superoxide anion production and actin polymerization. Methyl-β-cyclodextrin induces activation of p38 and Cdc42, but not Rac, in the nonstimulated PMN, yet inhibits subsequent lipopolysaccharide-induced activation of p38 and Cdc42. In parallel, methyl-β-cyclodextrin primes the human PMN for subsequent superoxide release triggered by the formylated bacterial tripeptide formyl-Met-Leu-Phe, and induces actin polymerization in a subcellular distribution distinct from that induced by lipopolysaccharide. In sum, these findings provide evidence for an important regulatory role of cholesterol in both transmission of the lipopolysaccharide signal and the inflammatory phenotype of the human neutrophil.