IQGAP1 contains a number of protein recognition motifs through which it binds to targets. Several in vitro studies have documented that IQGAP1 interacts directly with calmodulin, actin, E-cadherin, β-catenin, and the small GTPases Cdc42 and Rac. Nevertheless, direct demonstration of in vivo function of mammalian IQGAP1 is limited. Using a novel assay to evaluate in vivo function of IQGAP1, we document here that micro-injection of IQGAP1 into early Xenopus embryos generates superficial ectoderm lesions at late blastula stages. This activity was retained by the mutated variants of IQGAP1 in which the calponin homology domain or the WW domain was deleted. By contrast, deletion of the IQ (IQGAP1-ΔIQ), Ras-GAP-related (IQGAP1-ΔGRD), or C-terminal (IQGAP1-ΔC) domains abrogated the effect of IQGAP1 on the embryos. None of the latter mutants bound Cdc42, suggesting that the binding of Cdc42 by IQGAP1 is critical for its function. Moreover, overexpression of IQGAP1, but not IQGAP1-ΔGRD, significantly increased the amount of active Cdc42 in embryonic cells. Co-injection of wild type IQGAP1 with dominant negative Cdc42, but not the dominant negative forms of Rac or Rho, blocked the effect of IQGAP1 on embryonic ectoderm. Together these data indicate that the activity of IQGAP1 in embryonic ectoderm requires Cdc42 function.