Phosphatases of the regenerating liver (PRL) play oncogenic roles in cancer development and metastasis. Although previous studies indicate that PRL-1 promotes cell growth and migration by activating both the ERK1/2 and RhoA pathways, the mechanism by which it activates these signaling events remains unclear. We have identified a PRL-1-binding peptide (Peptide 1) that shares high sequence identity with a conserved motif in the Src homology 3 (SH3) domain of p115 Rho GTPase-activating protein (GAP). p115 RhoGAP directly binds PRL-1 in vitro and in cells via its SH3 domain. Structural analyses of the PRL-1·Peptide 1 complex revealed a novel protein-protein interaction whereby a sequence motif within the PxxP ligand-binding site of the p115 RhoGAP SH3 domain occupies a folded groove within PRL-1. This prevents the canonical interaction between the SH3 domain of p115 RhoGAP and MEKK1 and results in activation of ERK1/2. Furthermore, PRL-1 binding activates RhoA signaling by inhibiting the catalytic activity of p115 RhoGAP. The results demonstrate that PRL-1 binding to p115 RhoGAP provides a coordinated mechanism underlying ERK1/2 and RhoA activation.