Amyloidogenic processing of amyloid-β precursor protein (AβPP) is associated with cholesterol- and sphingolipid-rich lipid rafts. Caveolin-1, a raft-residing protein, has been implicated in the pathogenesis of Alzheimer's disease. To determine the role of caveolin-1 in governing γ-secretase-mediated AβPP proteolysis, cellular γ-secretase activity was assessed in response to alteration in caveolin-1 expression. We demonstrated that suppression of caveolin-1 expression by RNA interference resulted in a significant increase in γ-secretase-mediated proteolysis of AβPP, generation of amyloid-β, and cleavage of Notch. Overexpression of caveolin-1 attenuated γ-secretase-mediated proteolysis of AβPP and Notch, substantiating the negative regulation of γ-secretase by caveolin-1. Furthermore, we found that cells deficient in caveolin-1 exhibited significantly increased co-localization of γ-secretase with clathrin-coated non-caveolar endocytic vesicles, demonstrating that the partitioning of γ-secretase between caveolar and non-caveolar membranes can be modulated by caveolin-1. Our data also showed that JNK activation is essential for caveolin-1-mediated regulation of γ-secretase. Together, our results strongly suggest that caveolin-1 is an important regulator of γ-secretase activity.