The Sec7 domain of the guanine nucleotide exchange factor ARNO (ARNO‐Sec7) is responsible for the exchange activity on the small GTP‐binding protein ARF1. ARNO‐Sec7 forms a stable complex with the nucleotide‐free form of [Δ17] ARF1, a soluble truncated form of ARF1. The crystal structure of ARNO‐Sec7 has been solved recently, and a site‐directed mutagenesis approach identified a hydrophobic groove and an adjacent hydrophilic loop as the ARF1‐binding site. We show that Glu156 in the hydrophilic loop of ARNO‐Sec7 is involved in the destabilization of Mg 2+ and GDP from ARF1. The conservative mutation E156D and the charge reversal mutation E156K reduce the exchange activity of ARNO‐Sec7 by several orders of magnitude. Moreover,[E156K] ARNO‐Sec7 forms a complex with the Mg 2+‐free form of [Δ17] ARF1‐GDP without inducing the release of GDP. Other mutations in ARNO‐Sec7 and in [Δ17] ARF1 suggest that prominent hydrophobic residues of the switch I region of ARF1 insert into the groove of the Sec7 domain, and that Lys73 of the switch II region of ARF1 forms an ion pair with Asp183 of ARNO‐Sec7.