Early endosomes move bidirectionally between the cell periphery and the interior through a mechanism regulated by the low molecular weight GTPase RhoD. Here, we identify a novel splice variant of human Diaphanous, hDia2C, which specifically binds to RhoD and is recruited onto early endosomes. Expression of RhoD and hDia2C induces a striking alignment of early endosomes along actin filaments and reduces their motility. This activity depends on the membrane recruitment and activation of c-Src kinase, thus uncovering a new role in endosome function. Our results define a novel signal transduction pathway, in which hDia2C and c-Src are sequentially activated by RhoD to regulate the motility of early endosomes through interactions with the actin cytoskeleton.