Cdc42 (cell division cycle 42) is a member of the Rho GTPase family which regulates a variety of cellular activities by controlling actin cytoskeleton and gene expression. Cdc42 is expressed in the form of two splice variants. The canonical Cdc42 isoform is prenylated (Cdc42-prenyl), whereas the brainspecific isoform can be palmitoylated (Cdc42-palm). In the present study we have demonstrated palmitoylation of endogenous Cdc42 in rodent and human brains and identified Cys188 and Cys189 as acylation sites of Cdc42-palm. Moreover, we have shown that Cys188 can also be prenylated. Analysis of acylation-deficient mutants revealed that lipidation of Cys188 is essential for proper membrane binding of Cdc42-palm as well as for Cdc42-mediated regulation of gene transcription and induction of densely packed filopodia in neuroblastoma cells. We also found that Cdc42-prenyl is a dominant splice variant in a wide range of commonly used cell lines as well as in the cerebellum, whereas Cdc42-palm is the main Cdc42 isoform in hippocampus, where it is critically involved in the formation of dendritic filopodia and spines. Replacement of endogenous Cdc42 by its acylation-deficient mutants revealed the importance of Cdc42-palm lipidation for its morphogenic and synaptogenic effects in neurons. These findings demonstrate that dual lipidation of Cdc42-palm represents an important regulator of morphogenic signalling in hippocampal neurons.