Dysfunctional regulation of airway smooth muscle tone is a feature of obstructive airway diseases such as asthma and chronic obstructive pulmonary disease. Airway smooth muscle contraction is directly associated with changes in the phosphorylation of myosin light chain (MLC), which is increased by Rho and decreased by Rac. Although cyclic adenosine monophosphate (cAMP)‐elevating agents are believed to relieve bronchoconstriction mainly via activation of protein kinase A (PKA), here we addressed the role of the novel cAMP‐mediated exchange protein Epac in the regulation of airway smooth muscle tone. Isometric tension measurements showed that specific activation of Epac led to relaxation of guinea pig tracheal preparations pre‐contracted with methacholine, independently of PKA. In airway smooth muscle cells, Epac activation reduced methacholine‐induced MLC phosphorylation. Moreover, when Epac was stimulated, we observed a decreased methacholine‐induced RhoA activation, measured by both stress fibre formation and pull‐down assay whereas the same Epac activation prevented methacholine‐induced Rac1 inhibition measured by pull‐down assay. Epac‐driven inhibition of both methacholine‐induced muscle contraction by Toxin B‐1470, and MLC phosphorylation by the Rac1‐inhibitor NSC23766, were significantly attenuated, confirming the importance of Rac1 in Epac‐mediated relaxation. Importantly, human airway smooth muscle tissue also expresses Epac, and Epac activation both relaxed pre‐contracted human tracheal preparations and decreased MLC phosphorylation. Collectively, we show that activation of Epac relaxes airway smooth muscle by decreasing MLC phosphorylation by skewing the balance of RhoA/Rac1 activation towards Rac1. Therefore, activation of Epac may have therapeutical potential in the treatment of obstructive airway diseases.