The IPL2 gene is known to be required for normal polarized cell growth in the budding yeast Saccharomyces cerevisiae. We now show that IPL2 is identical to the previously identified BEM2 gene. bem2 mutants are defective in bud site selection at 26 degrees C and localized cell surface growth and organization of the actin cytoskeleton at 37 degrees C. BEM2 encodes a protein with a COOH-terminal domain homologous to sequences found in several GTPase-activating proteins, including human Bcr. The GTPase-activating protein-domain from the Bem2 protein (Bem2p) or human Bcr can functionally substitute for Bem2p. The Rho1 and Rho2 GTPases are the likely in vivo targets of Bem2p because bem2 mutant phenotypes can be partially suppressed by increasing the gene dosage of RHO1 or RHO2. CDC55 encodes the putative regulatory B subunit of protein phosphatase 2A, and mutations in BEM2 have previously been identified as suppressors of the cdc55-1 mutation. We show here that mutations in the previously identified GRR1 gene can suppress bem2 mutations. grr1 and cdc55 mutants are both elongated in shape and cold-sensitive for growth, and cells lacking both GRR1 and CDC55 exhibit a synthetic lethal phenotype. bem2 mutant phenotypes also can be suppressed by the SSD1-vl (also known as SRK1) mutation, which was shown previously to suppress mutations in the protein phosphatase-encoding SIT4 gene. Cells lacking both BEM2 and SIT4 exhibit a synthetic lethal phenotype even in the presence of the SSD1-v1 suppressor. These genetic interactions together suggest that protein phosphorylation and dephosphorylation play an important role in the BEM2-mediated process of polarized cell growth.