Expression of caveolin-1 in the human mammary adenocarcinoma cell line MCF-7 causes ligand-independent concentration of oestrogen receptor alpha (ERalpha) in the nucleus, and potentiates ligand-independent and ligand-dependent transcription from an oestrogen response element-driven reporter gene. Furthermore, caveolin-1 co-immunoprecipitates with ERalpha [Schlegel, Wang, Katzenellenbogen, Pestell and Lisanti (1999) J. Biol. Chem. 274, 33551-33556]. In the present study we show that caveolin-1 binds directly to ERalpha. This interaction is mediated by residues 82-101 of caveolin-1 (i.e. the caveolin scaffolding domain) and residues 1-282 of ERalpha. The caveolin-binding domain of ERalpha includes the ligand-independent transactivation domain, activation function (AF)-1, but lacks the hormone-binding domain and the ligand-gated transactivation domain, AF-2. In co-transfection studies, caveolin-1 potentiates the transcriptional activation of ERalpha(1-282), a truncation mutant that has intact AF-1 and DNA-binding domains. Since AF-1 activity is regulated largely by phosphorylation we determined that co-expression with caveolin-1 increased the basal phosphorylation of ERalpha(1-282), but blocked the epidermal growth factor-dependent increase in phosphorylation. Indeed, caveolin-1 interacted with and potentiated the transactivation of an ERalpha mutant that cannot be phosphorylated by extracellular signal-regulated kinase (ERK)1/2 [ERalpha(Ser(118)-->Ala)]. Thus caveolin-1 is a novel ERalpha regulator that drives ERK1/2-independent phosphorylation and activation of AF-1.