Caveolae are flask-shaped plasma membrane specializations. A 22-kDa protein, caveolin, is a principal component of caveolar membranes in vivo. As recent evidence suggests that caveolae may participate in G protein-coupled signaling events, we have investigated the potential interaction of caveolin with heterotrimeric G proteins. Using cell fractionation techniques, we found that mutational or pharmacologic activation of Gs alpha prevents its cofractionation with caveolin. In a second independent approach, we directly examined the interaction of G proteins with caveolin. For this purpose, we recombinantly expressed caveolin as a glutathione S-transferase fusion protein. Using an in vitro binding assay, we found that caveolin interacts with G protein alpha subunits (Gs, Go, and Gi). Mutational or pharmacologic activation (with guanosine 5'-O-(thiotriphosphate)) of G alpha subunits prevents this interaction, indicating that the inactive GDP-bound form of G alpha subunits preferentially interacts with caveolin. This G protein binding activity is located within a 41-amino acid region of caveolin's cytoplasmic N-terminal domain (residues 61-101). Further functional analysis shows that a polypeptide derived from this region of caveolin (residues 82-101) effectively suppresses the basal activity of purified G proteins, apparently by inhibiting GDP/GTP exchange. This caveolin sequence is homologous to a region of the Rab GDP dissociation inhibitor, a known inhibitor of GDP/GTP exchange for Rab proteins. These data suggest that caveolin could function to negatively regulate the activation state of heterotrimeric G proteins.