Caveolin-1, an essential protein constituent of caveolae, is involved in cell signaling through its association with various signaling molecules. Epidermal growth factor receptor (EGFR) interacts directly with caveolin-1 and this interaction functionally regulates EGFR tyrosine kinase activity. In this report we investigated the role of caveolin-1 overexpression on EGFR signaling in MCF-7 breast cancer cell line. We demonstrate here that although total EGFR expression levels are similar, EGFR phosphorylation is diminished in MCF-7/CAV1 cells compared to parental MCF-7 cells. In addition, MCF-7/CAV1 cells exhibit higher total and activated Akt levels. Moreover, MCF-7/CAV1 cells stimulated with EGF display higher EGFR and Akt phosphorylation associated with enhanced proliferative and motility rates, compared to MCF-7 cells. Pretreatment with gefitinib inhibits EGF-induced stimulation of both EGFR and downstream Akt and MAPK more efficiently in MCF-7/CAV1 than in MCF-7 cells. In accordance, EGF-induced proliferation and migration is more effectively suppressed with gefinitib in MCF-7/CAV1 compared to parental cells. In conclusion these results suggest that caveolin-1 overexpression in MCF-7 breast cancer cell line modulates EGFR activation levels and EGF-induced EGFR signalling. This is associated with enhanced antitumor effects of gefitinib suggesting a role for EGFR inhibition in caveolin-1 overexpressing breast cancers.