Septins are a conserved family of eukaryotic GTP-binding, filament-forming proteins. In Saccharomyces cerevisiae, five septins (Cdc3p, Cdc10p, Cdc11p, Cdc12p, and Shs1p) form a complex and colocalize to the incipient bud site and as a collar of filaments at the neck of budded cells. Septins serve as a scaffold to localize septin-associated proteins involved in diverse processes and as a barrier to diffusion of membrane-associated proteins. Little is known about the role of nucleotide binding in septin function. Here, we show that Cdc3p, Cdc10p, Cdc11p, and Cdc12p all bind GTP and that P-loop and G4 motif mutations affect nucleotide binding and result in temperature-sensitive defects in septin localization and function. Two-hybrid, in vitro, and in vivo analyses show that for all four septins nucleotide binding is important in septin-septin interactions and complex formation. In the absence of complete complexes, septins do not localize to the cortex, suggesting septin localization factors interact only with complete complexes. When both complete and partial complexes are present, septins localize to the cortex but do not form a collar, perhaps because of an inability to form filaments. We find no evidence that nucleotide binding is specifically involved in the interaction of septins with septin-associated proteins.