Caveolin 1 (Cav-1) is an integral membrane protein that forms the coat structure of plasma membrane caveolae and regulates caveola-dependent functions. Caveolae are enriched in cholesterol and sphingolipids and are related to lipid rafts. Many studies implicate rafts as sites of assembly and budding of enveloped virus. We show that Cav-1 colocalizes with the paramyxovirus parainfluenza virus 5 (PIV-5) nucleocapsid (NP), matrix (M), and hemagglutinin-neuraminidase (HN) proteins. Moreover, electron microscopy shows that Cav-1 is clustered at sites of viral budding. HN, M, and F(1)/F(2) are associated with detergent-resistant membranes, and these proteins float on sucrose gradients with Cav-1-rich fractions. A complex containing Cav-1 with M, NP, and HN from virus-infected cells and a complex containing Cav-1 and M from M-transfected cells were found on coimmunoprecipitation. A role of Cav-1 in the PIV-5 life cycle was investigated by utilizing MCF-7 human breast cancer cells that stably express Cav-1 (MCF-7/Cav-1). PIV-5 entry into MCF-7 and MCF-7/Cav-1 was found to be Cav-1 independent. However, the interaction between HN and M proteins was dramatically reduced in the Cav-1 null MCF-7 cells, and PIV-5 grown in MCF-7 cells had a reduced infectivity. Similarly, when PIV-5 was grown in MDCK cells that stably expressed dominant negative Cav-1 (MDCK/P132LCav-1), the virus showed a reduced infectivity. Virions lacking Cav-1 were defective and contained high levels of host cellular proteins and reduced levels of HN and M. These data suggest that Cav-1 affects assembly and/or budding, and this is supported by the finding that Cav-1 is incorporated into mature viral particles.