Previously we showed that Cool-1 (Cloned out of library-1)/beta-Pix (Pak-interactive exchange factor) is phosphorylated at a specific tyrosine residue (Tyr-442) in a Src-dependent manner and serves as a dual function guanine nucleotide exchange factor (GEF)/signaling-effector for Cdc42 that is essential for transformation by Src. Here, we show that knocking-down Cool-1 or overexpressing a Cool-1 mutant that contains substitutions within its Dbl homology domain and is defective for GEF activity, inhibits Src-promoted cell migration. Similarly, the expression of a Cool-1 mutant containing a tyrosine to phenylalanine substitution at position 442, making it incapable of being phosphorylated in response to serum, epidermal growth factor (EGF), or Src, also causes a significant inhibition of the migration and invasive activity of cells expressing oncogenic Src. We further demonstrate that the phosphorylation of Cool-1 at Tyr-442 weakens its ability to bind to one of its primary interaction-partners, Cat-1 (Cool-associated tyrosine phosphosubstrate-1)/Git-1 (G protein-coupled receptor kinase-interactor-1), thus making Cat more accessible for binding to paxillin. This enables cells to alternate between states where they contain large numbers of focal complexes (i.e. conditions favoring Cool-1-Cat interactions) versus reduced numbers of focal complexes (conditions favoring Cat-paxillin interactions). Overall, these findings show that the phosphorylation-dephosphorylation cycle of Cool-1 at Tyr-442 can serve as a key regulatory signal for focal complex assembly-disassembly, and consequently, for the migration and invasive activity of Src-transformed cells.