Caveolin-1 is a principal component of caveolae membranes in vivo. Caveolin-1 mRNA and protein expression are lost or reduced during cell transformation by activated oncogenes. Interestingly, the human caveolin-1 gene is localized to a suspected tumor suppressor locus (7q31.1). However, it remains unknown whether caveolin-1 plays any role in regulating cell cycle progression. Here, we directly demonstrate that caveolin-1 expression arrests cells in the G(0)/G(1) phase of the cell cycle. We show that serum starvation induces up-regulation of endogenous caveolin-1 and arrests cells in the G(0)/G(1) phase of the cell cycle. Moreover, targeted down-regulation of caveolin-1 induces cells to exit the G(0)/G(1) phase. Next, we constructed a green fluorescent protein-tagged caveolin-1 (Cav-1-GFP) to examine the effect of caveolin-1 expression on cell cycle regulation. We directly demonstrate that recombinant expression of Cav-1-GFP induces arrest in the G(0)/G(1) phase of the cell cycle. To examine whether caveolin-1 expression is important for modulating cell cycle progression in vivo, we expressed wild-type caveolin-1 as a transgene in mice. Analysis of primary cultures of mouse embryonic fibroblasts from caveolin-1 transgenic mice reveals that caveolin-1 induces 1) cells to exit the S phase of the cell cycle with a concomitant increase in the G(0)/G(1) population, 2) a reduction in cellular proliferation, and 3) a reduction in the DNA replication rate. Finally, we demonstrate that caveolin-1-mediated cell cycle arrest occurs through a p53/p21-dependent pathway. Taken together, our results provide the first evidence that caveolin-1 expression plays a critical role in the modulation of cell cycle progression in vivo.