Recent studies demonstrate the interaction of BMPRII and caveolin-1 in various cell types. In this study we test the hypothesis that caveolin-1 interacts with and regulates BMPRII-dependent signaling in vascular smooth muscle cells. We demonstrate that BMPRII localizes to caveolae and directly interacts with caveolin-1 in mouse aortic smooth muscle cells. We demonstrate that this interaction is mediated by the caveolin-1 scaffolding domain and is regulated by caveolin-1 phosphorylation. Downregulation of caveolin-1 via siRNA resulted in a loss of BMP-dependent SMAD phosphorylation and gene regulation. Further studies revealed that loss of caveolin-1 results in decreased BMPRII membrane localization and decreased association of BMPRII with the type I BMP receptor BMPRIa. Dominant negative caveolin-1 decreased BMPRII membrane localization suggesting a role for caveolin-1 in BMPRII trafficking. Taken together, our findings establish caveolin-1 as an important regulator of downstream signaling and membrane targeting of BMPRII in vascular smooth muscle cells.