Epstein-Barr virus (EBV) is closely associated with nasopharyngeal carcinoma (NPC), a human malignancy notorious for its highly metastatic nature. Among EBV-encoded genes, latent membrane protein 1 (LMP1) is expressed in most NPC tissues and exerts oncogenicity by engaging multiple signaling pathways in a ligand-independent manner. LMP1 expression also results in actin cytoskeleton reorganization, which modulates cell morphology and cell motility- cellular process regulated by RhoGTPases, such as Cdc42. Despite the prominent association of Cdc42 activation with tumorigenesis, the molecular basis of Cdc42 activation by LMP1 in NPC cells remains to be elucidated. Here using GST-CBD (active Cdc42-binding domain) as bait in GST pull-down assays to precipitate active Cdc42 from cell lysates, we demonstrated that LMP1 acts through its transmembrane domains to preferentially induce Cdc42 activation in various types of epithelial cells, including NPC cells. Using RNA interference combined with re-introduction experiments, we identified FGD4 (FYVE, RhoGEF and PH domain containing 4) as the GEF (guanine nucleotide exchange factor) responsible for the activation of Cdc42 by LMP1. Serial deletion experiments and co-immunoprecipitation assays further revealed that ectopically expressed FGD4 modulated LMP1-mediated Cdc42 activation by interacting with LMP1. Moreover, LMP1, through its transmembrane domains, directly bound FGD4 and enhanced FGD4 activity toward Cdc42, leading to actin cytoskeleton rearrangement and increased motility of NPC cells. Depletion of FGD4 or Cdc42 significantly reduced (~50%) the LMP1-stimulated cell motility, an effect that was partially reversed by expression of a constitutively active mutant of Cdc42. Finally, quantitative RT-PCR and immunohistochemistry analyses showed that FGD4 and LMP1 were expressed in NPC tissues, supporting the potential physiologically relevance of this mechanism in NPC. Collectively, our results not only uncover a novel mechanism underlying LMP1-mediated Cdc42 activation, namely LMP1 interaction with FGD4, but also functionally link FGD4 to NPC tumorigenesis.