Second-phase insulin release requires the sustained mobilization of insulin granules from internal storage pools to the cell surface for fusion with the plasma membrane. However, the detailed mechanisms underlying this process remain largely unknown. GTP-loading of the small GTPase Cdc42 is the first glucose-specific activation step in the process, although how glucose triggers Cdc42 activation is entirely unknown. In a directed candidate screen for guanine nucleotide exchange factors (GEFs), which directly activate small GTPases, Cool-1/βPix was identified in pancreatic islet beta cells. In support of its role as the beta cell Cdc42 GEF, βPix coimmunoprecipitated with Cdc42 in human islets and MIN6 beta cells in a glucose-dependent manner, peaking just prior to Cdc42 activation. Furthermore, RNAi-mediated βPix reduction by 50% corresponded to full ablation of glucose-induced Cdc42 activation and significant attenuation of basal and glucose-stimulated insulin secretion. Of the two Cdc42 guanine nucleotide dissociation inhibitor (GDI) proteins identified in beta cells, βPix competed selectively with caveolin-1 (Cav-1) but not RhoGDI in coimmunoprecipitation and GST-Cdc42-GDP interaction assays. However, a phospho-deficient Cav-1-Y14F mutant failed to compete with βPix; Cav-1(Tyr14) is an established phosphorylation site for Src kinase. Taken together, these data support a new model, wherein glucose stimulates Cav-1 and induces its dissociation from Cdc42, possibly via Src kinase activation to phosphorylate Cav-1(Tyr14), to promote Cdc42-βPix binding and Cdc42 activation, and to trigger downstream signaling and ultimately sustain insulin release.