Diacylglycerol kinase (DGK) phosphorylates the second messenger diacylglycerol to yield phosphatidic acid. To date, very little is known about the regulation of DGK activity. We have previously identified the DGK theta isotype, which is predominantly expressed in brain (Houssa, B,, Schaap, D., van der Wal, J., Goto, K., Kondo, H., Yamakawa, A., Shibata, M., Takenawa, T., and Van Blitterswijk, W. J. (1997) J. Biol, Chem. 272, 10422-10428), We now report that DGK theta binds specifically to activated RhoA in transfected COS cells as well as in nontransfected neuronal N1E-115 cells. Binding is abolished by a point mutation (Y34N) in the effector loop of RhoA DGK theta does not bind to inactive RhoA, nor to the other Rho-family GTPases, Rac or Cdc42, Like active RhoA, DGK theta localizes to the plasma membrane. Strikingly, the binding of activated RhoA to DGK theta completely inhibits DGK catalytic activity. Our results suggest that DGK theta is a downstream effector of RhoA and that its activity is negatively regulated by RhoA, Through accumulation of newly produced diacylglycerol, RhoA-mediated inhibition of DGK theta may lead to enhanced PKC activity in response to external stimuli.