Rab GTPases are central elements of the vesicular transport machinery. An emerging view is that downstream effectors of these GTPases are multiprotein complexes that include nucleotide exchange factors to ensure coupling between GTPase activation and effector function. We have previously shown that Rab5, which regulates various steps of transport along the early endocytic pathway, is activated by a complex consisting of Rabex-5, a Rab5 nucleotide exchange factor, and the effector Rabaptin-5. We postulated that the physical association of these two proteins is necessary for their activity in Rab5-dependent endocytic membrane transport. To evaluate the functional implications of such complex formation, we have reconstituted it with the use of recombinant proteins and characterized its properties. First, we show that Rabaptin-5 increases the exchange activity of Rabex-5 on Rab5. Second, Rab5-dependent recruitment of Rabaptin-5 to early endosomes is completely dependent on its physical association with Rabex-5. Third, complex formation between Rabaptin-5 and Rabex-5 is essential for early endosome homotypic fusion. These results reveal a functional synergy between Rabaptin-5 and Rabex-5 in the complex and have implications for the function of analogous complexes for Rab and Rho GTPases.