A key feature of polarized epithelial cells is the ability to maintain the specific biochemical composition of the apical and basolateral plasma membrane domains while selectively allowing transport of proteins and lipids from one pole to the opposite by transcytosis. The small GTPase, rab17, a member of the rab family of regulators of intracellular transport, is specifically induced during cell polarization in the developing kidney. We here examined its intracellular distribution and function in both nonpolarized and polarized cells. By confocal immunofluorescence microscopy, rab17 colocalized with internalized transferrin in the perinuclear recycling endosome of BHK-21 cells. In polarized Eph4 cells, rab17 associated with the apical recycling endosome that has been implicated in recycling and transcytosis. The localization of rab17, therefore, strengthens the proposed homology between this compartment and the recycling endosome of nonpolarized cells. Basolateral to apical transport of two membrane-bound markers, the transferrin receptor and the FcLR 5-27 chimeric receptor, was specifically increased in Eph4 cells expressing rab17 mutants defective in either GTP binding or hydrolysis. Furthermore, the mutant proteins stimulated apical recycling of FcLR 5-27. These results support a role for rab17 in regulating traffic through the apical recycling endosome, suggesting a function in polarized sorting in epithelial cells.