Neurotransmitter regulation of salivary fluid secretion is mediated by activation of Ca(2+) influx. The Ca(2+)-permeable transient receptor potential canonical 1 (TRPC1) channel is crucial for fluid secretion. However, the mechanism(s) involved in channel assembly and regulation are not completely understood. We report that Caveolin1 (Cav1) is essential for the assembly of functional TRPC1 channels in salivary glands (SG) in vivo and thus regulates fluid secretion. In Cav1(-/-) mouse SG, agonist-stimulated Ca(2+) entry and fluid secretion are significantly reduced. Microdomain localization of TRPC1 and interaction with its regulatory protein, STIM1, are disrupted in Cav1(-/-) SG acinar cells, whereas Orai1-STIM1 interaction is not affected. Furthermore, localization of aquaporin 5 (AQP5), but not that of inositol (1,4,5)-trisphosphate receptor 3 or Ca(2+)-activated K(+) channel (IK) in the apical region of acinar cell was altered in Cav1(-/-) SG. In addition, agonist-stimulated increase in surface expression of AQP5 required Ca(2+) influx via TRPC1 channels and was inhibited in Cav1(-/-) SG. Importantly, adenovirus-mediated expression of Cav1 in Cav1(-/-) SG restored interaction of STIM1 with TRPC1 and channel activation, apical targeting and regulated trafficking of AQP5, and neurotransmitter stimulated fluid-secretion. Together these findings demonstrate that, by directing cellular localization of TRPC1 and AQP5 channels and by selectively regulating the functional assembly TRPC1-STIM1 channels, Cav1 is a crucial determinant of SG fluid secretion.