Notch is important to vessel homeostasis. We investigated the mechanistic role of caveolin-1 (Cav-1) in mediating the effects of alcohol (Ethanol/EtOH) on the γ-secretase proteolytic activity necessary for Notch signaling in vascular cells. Human coronary artery endothelial cells (HCAEC) were treated with EtOH (0-50 mM), Notch ligand delta-like ligand 4 (Dll4), and the γ-secretase inhibitor DAPT. EtOH stimulated Notch signaling in HCAEC as evidenced by increased Notch receptor (N1, N4) and target gene (hrt2, hrt3) mRNA levels with the most robust response achieved at 25 mM EtOH. Ethanol (25 mM) stimulated γ-secretase proteolytic activity, to the same extent as Dll4, in HCAEC membranes. Ethanol inhibited Cav-1 mRNA and protein levels in HCAEC. Caveolin-1 negatively regulated γ-secretase activity in HCAEC as Cav-1 knockdown stimulated it, while Cav-1 overexpression inhibited it. Moreover, Cav-1 overexpression blocked the stimulatory effect of EtOH on γ-secretase activity in HCAEC. Although EtOH also inhibited Cav-1 expression in human coronary artery smooth muscle cells (HCASMC), EtOH inhibited γ-secretase activity in HCASMC in contrast to its effect in HCAEC. The inhibitory effect of EtOH on γ-secretase in HCASMC was mimicked by Cav-1 knockdown and prevented by Cav-1 overexpression, suggesting that in these cells Cav-1 positively regulates γ-secretase activity. In conclusion, EtOH differentially regulates γ-secretase activity in arterial EC and SMC, being stimulatory and inhibitory, respectively. These effects are both mediated by caveolin-1 inhibition which itself has opposite effects on γ-secretase in the two cell types. This mechanism may underlie, in part, the effects of moderate drinking on atherosclerosis.