The p104 protein inhibits cellular proliferation when overexpressed in NIH3T3 cells and has been shown to associate with p85α, Grb2, and PLCγ1. In order to isolate other proteins that interact with p104, yeast two-hybrid screening was performed. Rac1 was identified as a binding partner of p104 and the interaction between p104 and Rac1 was confirmed by immunoprecipitation. Using a glutathione S-transferase (GST) pull-down assay with various p104 fragments, the 814-848 amino acid residue at the carboxyl-terminal region of p104 was identified as the key component to interact with Rac1. The CrkII which is involved in the Rac1-mediated cellular response was also found to interact with p104 protein. NIH3T3 cells which overexpressed p104 showed a decrease of Rac1 activity. However, neither the proline-rich domain mutant, which is unable to interact with CrkII, nor the carboxy-terminal deletion mutant could attenuate Rac1 activity. During the differentiation of myoblasts, the amount of p104 protein as well as transcript level was increased. The overexpression of p104 enhanced myotube differentiation, whereas siRNA of p104 reversed this process. In this process, more Rac1 and CrkII were bound to increased p104. Based on these results, we conclude that p104 is involved in muscle cell differentiation by modulating the Rac1 activity.