Diaphanous-related formins (DRFs) are key regulators of actin cytoskeletal dynamics whose in vitro actin assembly activities are thought to be regulated by autoinhibition. However, the in vivo consequences of autoinhibition and the involvement of DRFs in specific biological processes are not well understood. In this study, we show that in the DRFs FRLalpha (formin-related gene in leukocytes alpha) and mouse diaphanous 1, autoinhibition regulates a novel membrane localization activity in vivo as well as actin assembly activity in vitro. In FRLalpha, the Rho family guanosine triphosphatase Cdc42 relieves the autoinhibition of both membrane localization and biochemical actin assembly activities. FRLalpha is required for efficient Fc-gamma receptor-mediated phagocytosis and is recruited to the phagocytic cup by Cdc42. These results suggest that mutual autoinhibition of biochemical activity and cellular localization may be a general regulatory principle for DRFs and demonstrate a novel role for formins in immune function.