Proteins of the p21-activated kinase (Pak) family have been implicated in the regulation of gene expression, cytoskeletal architecture, and apoptosis. Although the ability of Cdc42 and Rac GTPases to activate Pak is well established, relatively little else is known about Pak regulation or the identity of Pak cellular targets. Here we report the identification of two closely related Pak3-binding proteins, possibly arising from alternative splicing, designated p50 and p85(Cool-1) (cloned out of library). Both isoforms of Cool contain a Src homology 3 domain that directly mediates interaction with Pak3 and tandem Dbl homology and pleckstrin homology domains. Despite the presence of the Dbl homology-pleckstrin homology motif, a characteristic of Rho family activators, activation of Cdc42 or Rac by Cool is not detectable. Instead binding of p50(Cool-1), but not p85(Cool-1), to Pak3 represses its activation by upstream activators such as the Dbl oncoprotein, indicating a novel mechanism of regulation of Pak signaling.