Transforming growth factor-β (TGF-β) 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-β-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-β cascade are associated with caveolin-1 in caveolae and that Cav-1 interacts with the Type I TGF-β receptor. Additionally, Cav-1 is able to suppress TGF-β-mediated phosphorylation of Smad-2 and subsequent downstream events. We localize the Type I TGF-β 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-β receptor complex.