The level of caveolin-1 expression closely correlates with the oncogenic transformation of NIH 3T3 cells, the proliferation of human cancer cells, and the differentiation of adipocytes and muscle cells. However, the role of caveolin-1 in endothelial cell proliferation and differentiation remains unknown. Here, we have shown that angiogenic growth factors that stimulate endothelial cell proliferation lead to dramatic reductions in caveolin-1 expression. In addition, using an in vitro Matrigel assay system, we studied the potential role of caveolin-1 in capillary-like tubule formation (i.e. endothelial cell differentiation) using human microvascular endothelial cells (HMEC-1). We showed that the level of endogenous caveolin-1 expression increased in a time-dependent manner when endothelial cells underwent differentiation and that the maximum level of caveolin-1 expression occurred just prior to the formation of capillary-like tubules. Interestingly, overexpression of caveolin-1, via an adenoviral gene delivery system, clearly accelerated endothelial cell differentiation/tubule formation and led to a dramatic approximately 3-fold increase in the number of capillary-like tubular structures. Conversely, down-regulation of caveolin-1 expression, via an antisense adenoviral approach, reduced the number of capillary-like tubules formed by >10-fold. Consistent with the unique function of caveolin-1 in interacting with key signaling molecules, delivery of the caveolin-1 scaffolding domain into the cytoplasm of living endothelial cells was also sufficient to enhance capillary-like tubule formation. Taken together, these results clearly demonstrate that caveolin-1 and the caveolin-1 scaffolding domain play an important positive role in the regulation of endothelial cell differentiation, a prerequisite step in the process of angiogenesis.