Rab geranylgeranyltransferase (RabGGTase or GGTase-II) catalyzes the post-translational prenylation of Rab proteins. Rab proteins are recognized as substrates only when they are complexed to Rab Escort Protein (REP). The classical model of prenylation complex assembly assumes initial formation of the Rab.REP binary complex, which subsequently binds to RabGGTase loaded with the isoprenoid donor geranylgeranyl pyrophosphate (GGpp). We demonstrate here that REP-1 can also associate with RabGGTase in the absence of Rab protein and that this interaction is dramatically strengthened by the presence of phosphoisoprenoids such as GGpp. The GGpp-dependent interaction between RabGGTase and REP-1 was observed using affinity precipitations and gel filtration and was quantitated on the basis of fluorescence assays. In the presence of GGpp, REP-1 binds to RabGGTase with a K(d) value of approximately 10 nm, while in its absence the affinity between the two proteins is in the micromolar range. We further demonstrate that binding of Rab7 to the RabGGTase.GGpp.REP-1 complex occurs without prior dissociation of REP-1. Analysis of binding and prenylation rate constants indicate that the RabGGTase.GGpp.REP-1 complex can function as a kinetically competent intermediate of the prenylation reaction. We conclude that, depending on the prevailing concentrations, binding of REP-1 to RabGGTase in the presence of GGpp may serve as an alternative pathway for the assembly of the prenylation machinery in vivo. Implications of these findings for the role of REP-1 in the prenylation reaction are discussed.