The activation of Rac1 and related Rho GTPases involves dissociation from Rho GDP-dissociation inhibitor proteins and translocation to membranes, where they bind effectors. Previous studies have suggested that the binding of Rac1 to membranes requires, and colocalizes with, cholesterol-rich liquid-ordered (lo) membrane domains (lipid rafts). Here, we have developed a fluorescence resonance energy transfer (FRET) assay that robustly detects Rac1 membrane targeting in living cells. Surprisingly, FRET with acceptor constructs that were targeted to either raft or non-raft areas indicated that Rac1 was present in both regions. Functional studies showed that Rac1 localization to non-raft regions decreased GTP loading as a result of inactivation by GTPase-activating proteins. In vitro, Rac1 translocation to supported lipid bilayers also required lo domains, yet Rac1 was concentrated in the liquid-disordered (ld) phase. Single-molecule analysis demonstrated that translocation occurred preferentially at lo-ld boundaries. These results, therefore, suggest that Rac1 translocates to the membrane at domain boundaries, then diffuses into raft and non-raft domains, which controls interactions. These findings resolve discrepancies in our understanding of Rac biology and identify novel mechanisms by which lipid rafts modulate Rho GTPase signaling.