Caveolae are an abundant feature of mammalian cells. Integral membrane proteins called caveolins drive the formation of caveolae but the precise mechanisms underlying caveola formation, and the origin of caveolae and caveolins during evolution, are unknown. Systematic evolutionary analysis shows conservation of genes encoding caveolins in metazoans. We provide evidence for extensive and ancient, local and genomic gene duplication, and classify distinct caveolin gene families. Vertebrate caveolin-1 and caveolin-3 isoforms, as well as an invertebrate (Apis mellifera, honeybee) caveolin, all form morphologically identical caveolae in caveolin-1-null mouse cells, demonstrating that caveola formation is a conserved feature of evolutionarily distant caveolins. However, coexpression of flotillin-1 and flotillin-2 did not cause caveola biogenesis in this system. In contrast to the other tested caveolins, C. elegans caveolin is efficiently transported to the plasma membrane but does not generate caveolae, providing evidence of diversity of function in the caveolin gene family. Using C. elegans caveolin as a template to generate hybrid caveolin constructs we now define domains of caveolin required for caveolae biogenesis. These studies lead to a model for caveola formation and novel insights into the evolution of caveolin function.