The cellular signal transduction pathways by which C3G, a RAS family guanine nucleotide exchange factor, mediates v-crk transformation are not well understood. Here we report the identification of Drosophila C3G, which, like its human cognate, specifically binds to CRK but not DRK/GRB2 adaptor molecules. During Drosophila development, constitutive membrane binding of C3G, which also occurs during v-crk transformation, results in cell fate changes and overproliferation, mimicking overactivity of the RAS-MAPK pathway. The effects of C3G overactivity can be suppressed by reducing the gene dose of components of the RAS-MAPK pathway and of RAP1. These findings provide the first in vivo evidence that membrane localization of C3G can trigger activation of RAP1 and RAS resulting in the activation of MAPK, one of the hallmarks of v-crk transformation previously thought to be mediated through activation of SOS.