Rac1 is a small, guanine-nucleotide binding protein that cycles between an inactive GDP-bound and active GTP-bound state to regulate actin-mediated motility, migration, and adhesion. Plasma membrane (PM) localization is essential for its biological activity. Rac1 PM targeting is directed by a C-terminal membrane anchor that encompasses a geranylgeranyl-cysteine-methyl-ester, palmitoyl, and a polybasic domain (PBD) of contiguous lysine and arginine residues. Using high-resolution imaging combined with spatial mapping analysis, I found that Rac1 forms nanoclusters on the PM. Cycling between the GTP- and GDP-bound states, Rac1 forms nanoclusters that are non-overlapping, consequently undergoing guanine nucleotide-dependent spatial segregation. I further found that Rac1 selectively associates with phosphatidic acid (PA) and phosphoinositol (3,4,5)-trisphosphate (PIP3), resulting in nanoclusters enriched in these anionic lipids. I found these lipids to be structurally important as depleting the PM of PA or PIP3 impaired both Rac1 PM targeting and nanoclustering. Lipid binding specificity of Rac1 is encoded in the C-terminal PBD amino acid sequence in combination with the adjacent lipid anchors. Point mutations within the PBD, including highly conserved arginine to lysine substitutions or mutations exchanging the geranylgeranyl for farnesyl, profoundly altered Rac1 lipid binding specificity without changing electrostatics of the protein and resulted in impaired macropinocytosis and decreased cell spreading. In this thesis, I proposed that Rac1 nanoclusters act as lipid-based signaling platforms emulating the spatiotemporal organization of Ras proteins and further showed that the Rac1 PBD-prenyl anchor has a biological function that extends beyond simple electrostatic engagement with the PM.