We show that caveolin-1 is a novel binding protein for Mdm2. After oxidative stress, caveolin-1 sequesters Mdm2 away from p53, leading to stabilization of p53 and up-regulation of p21(Waf1/Cip1) in human fibroblasts. Expression of a peptide corresponding to the Mdm2 binding domain of caveolin-1 is sufficient to up-regulate p53 and p21(Waf1/Cip1) protein expression and induce premature senescence. Oxidative stress-induced activation of the p53/p21(Waf1/Cip1) pathway and induction of premature senescence are compromised in caveolin-1 null mouse embryonic fibroblasts (MEF). We also show that reintroduction of caveolin-1 in oncogenic Ras (Ras(G12V))-transformed fibroblasts, which express residual levels of caveolin-1, is sufficient to promote cellular senescence. Moreover, caveolin-1 expression in MEFs is required for senescent fibroblast-induced stimulation of cell growth and tumorigenesis of both Ras(G12V)-transformed fibroblasts and MDA-MB-231 breast cancer epithelial cells both in vitro and in vivo. Thus, our results propose caveolin-1 as a key mediator of the antagonistic pleiotropic properties of cellular senescence. [Cancer Res 2009;69(7):2878-86]