Transactivation of the epidermal growth factor receptor (EGFR) by tumor necrosis factor-α (TNF-α) is a key step in mediating RhoA activation and cytoskeleton and junction remodeling in the tubular epithelium. In this study we explore the mechanisms underlying TNF-α-induced EGFR activation. We show that TNF-α stimulates the TNF-α convertase enzyme (TACE/a disintegrin and metalloproteinase-17), leading to activation of the EGFR/ERK pathway. TACE activation requires the mitogen-activated protein kinase p38, which is activated through the small GTPase Rac. TNF-α stimulates both Rac and RhoA through the guanine nucleotide exchange factor (GEF)-H1 but by different mechanisms. EGFR- and ERK-dependent phosphorylation at the T678 site of GEF-H1 is a prerequisite for RhoA activation only, whereas both Rac and RhoA activation require GEF-H1 phosphorylation on S885. Of interest, GEF-H1-mediated Rac activation is upstream from the TACE/EGFR/ERK pathway and regulates T678 phosphorylation. We also show that TNF-α enhances epithelial wound healing through TACE, ERK, and GEF-H1. Taken together, our findings can explain the mechanisms leading to hierarchical activation of Rac and RhoA by TNF-α through a single GEF. This mechanism could coordinate GEF functions and fine-tune Rac and RhoA activation in epithelial cells, thereby promoting complex functions such as sheet migration.