Caveolin-1 is the principal structural component of caveolae microdomains, which represent a subcompartment of the plasma membrane. Several independent lines of evidence support the notion that caveolin-1 functions as a suppressor of cell transformation. For example, the human CAV-1 gene maps to a suspected tumor suppressor locus (D7S522/7q31.1) that is frequently deleted in a number of carcinomas, including breast cancers. In addition, up to 16% of human breast cancers harbor a dominant-negative mutation, P132L, in the CAV-1 gene. Despite these genetic associations, the tumor suppressor role of caveolin-1 still remains controversial. To directly assess the in vivo transformation suppressor activity of the caveolin-1 gene, we interbred Cav-1 (−/−) null mice with tumor-prone transgenic mice (MMTV-PyMT) that normally develop multifocal dysplastic lesions throughout the entire mammary tree. Herein, we show that loss of caveolin-1 gene expression dramatically accelerates the development of these multifocal dysplastic mammary lesions. At 3 wk of age, loss of caveolin-1 resulted in an approximately twofold increase in the number of lesions (foci per gland; 3.3 ± 1.0 vs. 7.0 ± 1.2) and an approximately five- to sixfold increase in the total area occupied by these lesions. Similar results were obtained at 4 wk of age. However, complete loss of caveolin-1 was required to accelerate the appearance of these dysplastic mammary lesions, because Cav-1 (+/−) heterozygous mice did not show any increases in foci development. We also show that loss of caveolin-1 increases the extent and the histological grade of these mammary lesions and facilitates the development of papillary projections in the mammary ducts. Finally, we demonstrate that cyclin D1 expression levels are dramatically elevated in Cav-1 (−/−) null mammary lesions, consistent with the accelerated appearance and growth of these dysplastic foci. This is the first in vivo demonstration that caveolin-1 can function as a transformation suppressor gene.