Caveolae are plasma membrane specializations that have been implicated in signal transduction. Caveolin, a 21-24-kDa integral membrane protein, is a principal structural component of caveolae membranes in vivo. G protein alpha subunits are concentrated in purified preparations of caveolae membranes, and caveolin interacts directly with multiple G protein alpha subunits, including G(s), G(o), and G(i2). Mutational or pharmacologic activation of G alpha subunits prevents the interaction of caveolin with G proteins, indicating that inactive G alpha subunits preferentially interact with caveolin. Here, we show that caveolin interacts with another well characterized signal transducer, Ras. Using a detergent-free procedure for purification of caveolin-rich membrane domains and a polyhistidine tagged form of caveolin, we find that Ras and other classes of lipid-modified signaling molecules co-fractionate and co-elute with caveolin. The association of Ras with caveolin was further evaluated using two distinct in vitro binding assays. Wild-type H-Ras interacted with glutathione S-transferase (GST)-caveolin fusion proteins but not with GST alone. Using a battery of GST fusion proteins encoding distinct regions of caveolin, Ras binding activity was localized to a 41-amino acid membrane proximal region of the cytosolic N-terminal domain of caveolin. In addition, reconstituted caveolin-rich membranes (prepared with purified recombinant caveolin and purified lipids) interacted with a soluble form of wild-type H-Ras but failed to interact with mutationally activated soluble H-Ras (G12V). Thus, a single amino acid change (G12V) that constitutively activates Ras prevents or destabilizes this interaction. These results clearly indicate that (i) caveolin is sufficient to recruit soluble Ras onto lipid membranes and (ii) membrane-bound caveolin preferentially interacts with inactive Ras proteins. In direct support of these in vitro studies, we also show that recombinant overexpression of caveolin in intact cells is sufficient to functionally recruit a nonfarnesylated mutant of Ras (C186S) onto membranes, overcoming the normal requirement for lipid modification of Ras. Taken together, these observations suggest that caveolin may function as a scaffolding protein to localize or sequester certain caveolin-interacting proteins, such as wild-type Ras, within caveolin-rich microdomains of the plasma membrane.