Angiotensin II (Ang II) induces transactivation of the epidermal growth factor (EGF) receptor (EGF-R), which serves as a scaffold for various signaling molecules in vascular smooth muscle cells (VSMCs). Cholesterol and sphingomyelin-enriched lipid rafts are plasma membrane microdomains that concentrate various signaling molecules. Caveolae are specialized lipid rafts that are organized by the cholesterol-binding protein, caveolin, and have been shown to be associated with EGF-Rs. Angiotensin II stimulation promotes a rapid movement of AT(1) receptors to caveolae; however, their functional role in angiotensin II signaling has not been elucidated. Here we show that cholesterol depletion by beta-cyclodextrin disrupts caveolae structure and concomitantly inhibits tyrosine phosphorylation of the EGF-R and subsequent activation of protein kinase B (PKB)/Akt induced by angiotensin II. Similar inhibitory effects were obtained with other cholesterol-binding agents, filipin and nystatin. In contrast, EGF-R autophosphorylation and activation of Akt/PKB in response to EGF are not affected by cholesterol depletion. The early Ang II-induced upstream signaling events responsible for transactivation of the EGF-R, such as the intracellular Ca(2+) increase and c-Src activation, also remain intact. The EGF-R initially binds caveolin, but these two proteins rapidly dissociate following angiotensin II stimulation during the time when EGF-R transactivation is observed. The activated EGF-R is localized in focal adhesions together with tyrosine-phosphorylated caveolin. These findings suggest that 1) a scaffolding role of caveolin is essential for EGF-R transactivation by angiotensin II and 2) cholesterol-rich microdomains as well as focal adhesions are important signal-organizing compartments required for the spatial and temporal organization of angiotensin II signaling in VSMCs.