To determine the cellular route by which vascular endothelial cell growth factor (VEGF) increases the permeability of cultured retinal endothelial cells and to test whether nitric oxide (NO) production by NO synthase (NOS) is involved in signaling VEGF's permeability enhancing effects. Cultured bovine retinal microvascular endothelial (BRE) cells were used for bioassay of permeability function and its ultrastructural correlates. The role of NOS activity in VEGF's permeability enhancing effects was tested with the use of an NOS inhibitor. Because activity of endothelial NOS (eNOS) is thought to be regulated by its interaction with the caveolar protein caveolin-1, structural relationships between eNOS, caveolin-1, and the VEGF receptor FIk-1/KDR were analyzed with double-label immunofluorescence and cell fractionation procedures. Bioassays of permeability function and structure demonstrated that VEGF increases permeability of cultured BRE cells by an NOS-dependent process of transcytotic transport in caveolae. Double-label analysis showed that Flk-1/KDR and eNOS colocalize with caveolin-1 in plasma membrane caveolae. Cell fractionation and immunoblot analysis confirmed this effect. Densitometry showed that Flk-1/KDR, eNOS, and caveolin-1 levels were highest in caveolar fractions. Similar results were obtained in studies with bovine aortic endothelial cells. These results demonstrate that VEGF increases endothelial cell permeability by an eNOS-dependent mechanism of transcytosis in caveolae. Localization of Flk-1/KDR and eNOS with caveolin-1 suggests that VEGF signaling occurs within the caveolar compartment.