Caveolin-1 (Cav-1), an integral component of caveolar membrane domains, is expressed in several retinal cell types, including photoreceptors, retinal vascular endothelial cells, Müller glia, and retinal pigment epithelium (RPE) cells. Recent evidence links Cav-1 to ocular diseases, including autoimmune uveitis, diabetic retinopathy, and primary open angle glaucoma, but its role in normal vision is largely undetermined. In this report, we show that ablation of Cav-1 results in reduced inner and outer retinal function as measured, in vivo, by electroretinography and manganese-enhanced MRI. Somewhat surprisingly, dark current and light sensitivity were normal in individual rods (recorded with suction electrode methods) from Cav-1 knock-out (KO) mice. Although photoreceptor function was largely normal, in vitro, the apparent K(+) affinity of the RPE-expressed α1-Na(+)/K(+)-ATPase was decreased in Cav-1 KO mice. Cav-1 KO retinas also displayed unusually tight adhesion with the RPE, which could be resolved by brief treatment with hyperosmotic medium, suggesting alterations in outer retinal fluid homeostasis. Collectively, these findings demonstrate that reduced retinal function resulting from Cav-1 ablation is not photoreceptor-intrinsic but rather involves impaired subretinal and/or RPE ion/fluid homeostasis.