The ERM proteins, ezrin, radixin, and moesin, are involved in the actin filament/plasma membrane interaction as cross-linkers. CD44 has been identified as one of the major membrane binding partners for ERM proteins. To examine the CD44/ERM protein interaction in vitro, we produced mouse ezrin, radixin, moesin, and the glutathione-S-transferase (GST)/CD44 cytoplasmic domain fusion protein (GST-CD44cyt) by means of recombinant baculovirus infection, and constructed an in vitro assay for the binding between ERM proteins and the cytoplasmic domain of CD44. In this system, ERM proteins bound to GST-CD44cyt with high affinity (Kd of moesin was 9.3 +/- 1.6nM) at a low ionic strength, but with low affinity at a physiological ionic strength. However, in the presence of phosphoinositides (phosphatidylinositol [PI], phosphatidylinositol 4-monophosphate [4-PIP], and phosphatidylinositol 4.5-bisphosphate [4,5-PIP2]), ERM proteins bound with a relatively high affinity to GST-CD44cyt even at a physiological ionic strength: 4,5-PIP2 showed a marked effect (Kd of moesin in the presence of 4,5-PIP2 was 9.3 +/- 4.8 nM). Next, to examine the regulation mechanism of CD44/ERM interaction in vivo, we reexamined the immunoprecipitated CD44/ERM complex from BHK cells and found that it contains Rho-GDP dissociation inhibitor (GDI), a regulator of Rho GTPase. We then evaluated the involvement of Rho in the regulation of the CD44/ERM complex formation. When recombinant ERM proteins were added and incubated with lysates of cultured BHK cells followed by centrifugation, a portion of the recombinant ERM proteins was recovered in the insoluble fraction. This binding was enhanced by GTP gamma S and markedly suppressed by C3 toxin, a specific inhibitor of Rho, indicating that the GTP form of Rho in the lysate is required for this binding. A mAb specific for the cytoplasmic domain of CD44 also markedly suppressed this binding, identifying most of the binding partners for exogenous ERM proteins in the insoluble fraction as CD44. Consistent with this binding analysis, in living BHK cells treated with C3 toxin, most insoluble ERM proteins moved to soluble compartments in the cytoplasm, leaving CD44 free from ERM. These findings indicate that Rho regulates the CD44/ERM complex formation in vivo and that the phosphatidylinositol turnover may be involved in this regulation mechanism.