Based on the observation that the Na(+)/K(+)-ATPase alpha subunit contains two conserved caveolin-binding motifs, we hypothesized that clustering of the Na(+)/K(+)-ATPase and its partners in caveolae facilitates ouabain-activated signal transduction. Glutathione S-transferase pull-down assay showed that the Na(+)/K(+)-ATPase bound to the N terminus of caveolin-1. Significantly, ouabain regulated the interaction in a time- and dose-dependent manner and stimulated tyrosine phosphorylation of caveolin-1 in LLC-PK1 cells. When added to the isolated membrane fractions, ouabain increased tyrosine phosphorylation of proteins from the isolated caveolae but not other membrane fractions. Consistently, ouabain induced the formation of a Na(+)/K(+)-ATPase-Src-caveolin complex in the isolated caveolae preparations as it did in live cells. Finally, depletion of either cholesterol by methyl beta-cyclodextrin or caveolin-1 by siRNA significantly reduced the caveolar Na(+)/K(+)-ATPase and Src. Concomitantly, cholesterol depletion abolished ouabain-induced recruitment of Src to the Na(+)/K(+)-ATPase signaling complex. Like depletion of caveolin-1, it also blocked the effect of ouabain on ERKs, which was restored after cholesterol repletion. Clearly, the caveolar Na(+)/K(+)-ATPase represents the signaling pool of the pump that interacts with Src and transmits the ouabain signals.