A genetic screen for GTPase-activating proteins (GAPs) or other negative regulators of the Rac/Rho family GTPase Cdc42p in Saccharomyces cerevisiae identified ZDS1, a gene encoding a protein of 915 amino acids. Sequence from the yeast genome project identified a homolog, ZDS2, whose predicted product of 942 amino acids is 38% identical in sequence to Zds1p. Zds1p and Zds2p have no detectable homology to known Rho-GAPs or to other known proteins. However, by several assays, it appears that overexpression of either Zds1p or Zds2p decreases the level of Cdc42p activity. Deletion analysis also suggests that Zds1p and Zds2p are at least partially overlapping in function. Deletion of ZDS2 produced no obvious phenotype, and deletion of ZDS1 produced no obvious phenotype other than a mild effect on cell shape. However, the zds1 zds2 double mutant grew slowly with an apparent mitotic delay and produced elongated cells and buds with other evidence of abnormal morphogenesis. A glutathione S-transferase-Zds1p fusion protein that fully complemented the double mutant localized to presumptive bud sites and the tips of small buds. The similarity of this localization to that of Cdc42p suggests that Zds1p may interact directly with Cdc42p. As ZDS1 and ZDS2 have recently been identified also by numerous other groups studying a wide range of biological phenomena, the roles of Cdc42p in intracellular signaling may be more diverse than has previously been appreciated.