Endothelial nitric-oxide synthase (eNOS) generates the key signaling molecule nitric oxide in response to intralumenal hormonal and mechanical stimuli. We designed studies to determine whether eNOS is localized to plasmalemmal microdomains implicated in signal transduction called caveolae. Using immunoblot analysis, eNOS protein was detected in caveolar membrane fractions isolated from endothelial cell plasma membranes by a newly developed detergent-free method; eNOS protein was not found in noneaveolar plasma membrane. Similarly, NOS enzymatic activity was 9.4-fold enriched in caveolar membrane versus whole plasma membrane, whereas it was undetectable in non-caveolar plasma membrane. 51-86% of total NOS activity in postnuclear supernatant was recovered in plasma membrane, and 57-100% of activity in plasma membrane was recovered in caveolae. Immunoelectron microscopy showed that eNOS heavily decorated endothelial caveolae, whereas coated pits and smooth plasma membrane were devoid of gold particles. Furthermore, eNOS was targeted to caveolae in COS-7 cells transfected with wild-type eNOS cDNA. Studies with eNOS mutants revealed that both myristoylation and palmitoylation are required to target the enzyme to caveolae and that each acylation process enhances targeting by 10-fold. Thus, acylation targets eNOS to plasmalemmal caveolae. Localization to this microdomain is likely to optimize eNOS activation and the extracellular release of nitric oxide.