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The small Rho-family GTPase Cdc42 is critical for cell polarization and polarizes spontaneously in absence of upstream spatial cues. Spontaneous polarization is thought to require dynamic Cdc42 recycling through Guanine nucleotide Dissociation Inhibitor (GDI)-mediated membrane extraction and vesicle trafficking. Here, we describe a functional fluorescent Cdc42 allele in fission yeast, which demonstrates Cdc42 dynamics and polarization independent of these pathways. Furthermore, an engineered Cdc42 allele targeted to the membrane independently of these recycling pathways by an amphipathic helix is viable and polarizes spontaneously to multiple sites in fission and budding yeasts. We show that Cdc42 is highly mobile at the membrane and accumulates at sites of activity, where it displays slower mobility. By contrast, a near-immobile transmembrane domain-containing Cdc42 allele supports viability and polarized activity, but does not accumulate at sites of activity. We propose that Cdc42 activation, enhanced by positive feedback, leads to its local accumulation by capture of fast-diffusing inactive molecules., This study of fission yeast reveals that the active and inactive forms of the small GTPase Cdc42 have different rates of lateral diffusion in the membrane, providing insights into how it becomes spontaneously polarized, thereby determining the polarity of the cell., Author Summary Cell polarization is a critical feature of most cells that underlies their functional organization. A central polarity factor called Cdc42, a small GTPase targeted to the plasma membrane by prenylation, promotes cell polarization in its active GTP-bound form. Cdc42 is a key polarity factor because it accumulates at presumptive sites of polarity, which previous work suggested involves Cdc42 recycling on and off the plasma membrane. In addition, its activity can spontaneously polarize cells in a single location by self-enhancing positive feedback mechanisms, even in the absence of any pre-localized landmarks. In this study, we constructed the first functional fluorescently tagged allele of Cdc42 that replaces the endogenous genomic copy in Schizosaccharomyces pombe. This allowed measurements of Cdc42 dynamics at the plasma membrane by live microscopy. Unexpectedly, this approach revealed that Cdc42 primarily moves through lateral diffusion, rather than on and off the plasma membrane. Engineered Cdc42 alleles with alternative membrane-targeting mechanisms demonstrated that Cdc42 activity, indeed, polarizes in the absence of known pathways that recycle Cdc42 on and off the membrane. We further show that the active form, Cdc42-GTP, is less mobile than Cdc42-GDP. We thus propose that Cdc42 polarization occurs as a consequence of its local activation—either through self-enhanced feedback or in response to upstream cues—by a reduction in the active Cdc42 diffusion rate.