Rab GTPases function as essential regulators of vesicle transport in eukaryotic cells. MSS4 was shown to stimulate nucleotide exchange on Rab proteins associated with the exocytic pathway and to have nucleotide-free-Rab chaperone activity. A detailed kinetic analysis of MSS4 interaction with Rab8 showed that MSS4 is a relatively slow exchange factor that forms a long-lived nucleotide-free complex with RabGTPase. In contrast to other characterized exchange factor-GTPase complexes, MSS4:Rab8 complex binds GTP faster than GDP, but still ca. 3 orders of magnitude more slowly than comparable complexes. The crystal structure of the nucleotide-free MSS4:Rab8 complex revealed that MSS4 binds to the Switch I and interswitch regions of Rab8, forming an intermolecular beta-sheet. Complex formation results in dramatic structural changes of the Rab8 molecule, leading to unfolding of the nucleotide-binding site and surrounding structural elements, facilitating nucleotide release and slowing its rebinding. Coupling of nucleotide exchange activity to a cycle of GTPase unfolding and refolding represents a novel nucleotide exchange mechanism.