We have examined the role of the mouse Diaphanous-related formin (DRF) Rho GTPase binding proteins, mDia1 and mDia2, in cell regulation. The DRFs are required for cytokinesis, stress fiber formation, and transcriptional activation of the serum response factor (SRF). 'Activated' mDia1 and mDia2 variants, lacking their GTPase binding domains, cooperated with Rho-kinase or ROCK to form stress fibers but independently activated SRF. Src tyrosine kinase associated and co-localized with the DRFs in endosomes and in mid-bodies of dividing cells. Inhibition of Src also blocked cytokinesis, SRF induction by activated DRFs, and cooperative stress fiber formation with active ROCK. Our results show that the DRF proteins couple Rho and Src during signaling and the regulation of actin dynamics.