Epidermal growth factor receptor (EGFR) signaling regulates cell growth and survival, and its overactivation drives cancer development. One important branch of EGFR signaling is through activation of GTPase Rac1, which further promotes cell proliferation, survival and cancer metastasis. Here, we show that EGFR activates Rac1 via inducing the accumulation of its specific guanine nucleotide exchange factor, T-cell lymphoma invasion and metastasis 1 (Tiam1) in non-small-cell lung cancer and colon cancer cells. Conversely, elevated Tiam1 is required for EGFR-induced tumorigenesis. In human lung adenocarcinoma and colon cancer specimens, Tiam1 expression strongly correlates with EGFR expression. We further reveal that AKT, a key downstream protein kinase of EGFR, phosphorylates Tiam1 at several consensus sites, facilitates the interaction of Tiam1 with scaffold proteins 14-3-3 and leads to an increase of Tiam1 stability. Subsequently, Tiam1 is dephosporylated and destabilized by PP2A. Together, our study identifies a bidirectional (phosphorylation and dephosphorylation) regulatory mechanism controlling Tiam1 stability and provides new insights on how EGFR signaling triggers Rac1 activation and cancer development.