Mesenchymal stem cells (MSC) are suggested to be important progenitors of myofibroblasts in fibrosis. To understand the role of Rho GTPase signaling in TGFβ-induced myofibroblast differentiation of MSC, we generated a novel MSC line and its descendants lacking functional Rho GTPases and Rho GTPase signaling components. Unexpectedly, our data revealed that Rho GTPase signaling is required for TGFβ-induced expression of α-smooth muscle actin (αSMA) but not of collagen I α1 (col1a1). Whereas loss of RhoA and Cdc42 reduced αSMA expression, ablation of the Rac1 gene had the opposite effect. Although actin polymerization and MRTFa were crucial for TGFβ-induced αSMA expression, neither Arp2/3-dependent actin polymerization nor cofilin-dependent severing and depolymerization of F-actin were required. Instead, F-actin levels were dependent on cell contraction, and TGFβ-induced actin polymerization correlated with increased cell contraction mediated by RhoA and Cdc42. Finally, we observed impaired collagen I secretion in MSC lacking RhoA or Cdc42. These data give novel molecular insights into the role of Rho GTPases in TGFβ signaling and have implications for our understanding of MSC function in fibrosis.