Evidence suggests that estrogen mediates rapid endothelial nitric oxide synthase (eNOS) activation via estrogen receptor-a (ERα) within the plasma membrane of endothelial cells (EC). ERα is known to colocalize with caveolin 1, the major structural protein of caveolae, and caveolin 1 stimulates the translocation of ERα to the plasma membrane. However, the role played by caveolin 1 in regulating 17β-estradiol-mediated NO signaling in EC has not been adequately resolved. Thus, the purpose of this study was to explore how 17β-estradiol stimulates eNOS activity and the role of caveolin 1 in this process. Our data demonstrate that modulation of caveolin 1 expression using small interfering RNA or adenoviral gene delivery alters ERα localization to the plasma membrane in EC. Further, before estrogen stimulation ERα associates with caveolin 1, whereas stimulation promotes a pp60^Src-mediated phosphorylation of caveolin 1 at tyrosine 14, increasing ERα-PI3 kinase interactions and disrupting caveolin 1-ERα interactions. Adenoviral mediated overexpression of a phosphorylation-deficient mutant of caveolin (Y14FCav) attenuated the ERα/PI3 kinase interaction and prevented Akt-mediated eNOS activation. Furthermore, Y14FCav overexpression reduced eNOS phosphorylation at serine1177 and decreased NO generation after estrogen exposure. Using a library of overlapping peptides we identified residues 62–73 of caveolin 1 as the ERα-binding site. Delivery of a synthetic peptide based on this sequence decreased ERα plasma membrane translocation and reduced estrogen-mediated activation of eNOS. In conclusion, caveolin 1 stimulates 17β-estradiol-induced NO production by promoting ERα to the plasma membrane, which facilitates the activation of the PI3 kinase pathway, leading to eNOS activation and NO generation.