The dbl oncogene encodes a prototype member of the Rho GTPase guanine nucleotide exchange factor (GEF) family. Oncogenic activation of proto-Dbl occurs through truncation of the N-terminal 497 residues. The C-terminal half of proto-Dbl includes residues 498 to 680 and 710 to 815, which fold into the Dbl homology (DH) domain and the pleckstrin homology (PH) domain, respectively, both of which are essential for cell transformation via the Rho GEF activity or cytoskeletal targeting function. Here we have investigated the mechanism of the apparent negative regulation of proto-Dbl imposed by the N-terminal sequences. Deletion of the N-terminal 285 or C-terminal 100 residues of proto-Dbl did not significantly affect either its transforming activity or GEF activity, while removal of the N-terminal 348 amino acids resulted in a significant increase in both transformation and GEF potential. Proto-Dbl displayed a mostly perinuclear distribution pattern, similar to a polypeptide derived from its N-terminal sequences, whereas onco-Dbl colocalized with actin stress fibers, like the PH domain. Coexpression of the N-terminal 482 residues with onco-Dbl resulted in disruption of its cytoskeletal localization and led to inhibition of onco-Dbl transforming activity. The apparent interference with the DH and PH functions by the N-terminal sequences can be rationalized by the observation that the N-terminal 482 residues or a fragment containing residues 286 to 482 binds specifically to the PH domain, limiting the access of Rho GTPases to the catalytic DH domain and masking the intracellular targeting function of the PH domain. Taken together, our findings unveiled an autoinhibitory mode of regulation of proto-Dbl that is mediated by the intramolecular interaction between its N-terminal sequences and PH domain, directly impacting both the GEF function and intracellular distribution.