Caveolin-3 protein is the only member of the caveolin family that shows a unique muscle-specific expression pattern, and loss of its functional activity causes muscular dystrophy. Caveolin-3 mRNA levels are dramatically increased during the formation of myotubes in the C2C12 cell line. In this study, we characterized the human caveolin-3 5'-flanking region. Promoter analyses demonstrate that the proximal E box element serves as a myogenin binding site and is both necessary and sufficient to control caveolin-3 gene transcription. Transient transfection assays indicated that overexpression of myogenin activates caveolin-3 reporter gene expression, whereas Id2 overexpression inhibited caveolin-3 promoter activation by myogenin. A mutant Id2 protein lacking the HLH domain was not capable of suppressing myogenin-mediated activation. Determination of caveolin-3 transcript distribution patterns in vivo revealed that mRNA was first detectable at day 10 of gestation in the developing somites and heart. Caveolin-3 protein in myoblasts and myotubes was expressed in both the plasma membrane and vesicular structures. During skeletal myogenesis the level of Id2, an inhibitor of differentiation, decreases, allowing the induced basic helix-loop-helix transcription factor myogenin to form transcriptionally active heterodimers that bind to the caveolin-3 promoter and thereby mediate its transcription.