Transforming growth factor-beta (TGF-beta) signaling proceeds from the cell membrane to the nucleus through the cooperation of the type I and II serine/threonine kinase receptors and their downstream SMAD effectors. Although various regulatory proteins affecting TGF-beta-mediated events have been described, relatively little is known about receptor interactions at the level of the plasma membrane. Caveolae are cholesterol-rich membrane microdomains that, along with their marker protein caveolin-1 (Cav-1), have been implicated in the compartmentalization and regulation of certain signaling events. Here, we demonstrate that specific components of the TGF-beta cascade are associated with caveolin-1 in caveolae and that Cav-1 interacts with the Type I TGF-beta receptor. Additionally, Cav-1 is able to suppress TGF-beta-mediated phosphorylation of Smad-2 and subsequent downstream events. We localize the Type I TGF-beta receptor interaction to the scaffolding domain of Cav-1 and show that it occurs in a physiologically relevant time frame, acting to rapidly dampen signaling initiated by the TGF-beta receptor complex.