Regulated signal transduction in discrete microdomains of the cell surface is an attractive hypothesis for achieving spatial and temporal specificity in signaling. A procedure for purifying caveolae separately from other similarly buoyant microdomains including those rich in glycosylphosphatidylinositol-anchored proteins has been developed (Schnitzer, J. E., McIntosh, D. P., Dvorak, A. M., Liu, J., and Oh, P. (1995) Science 269, 1435-1439) and used here to show that caveolae contain many signaling molecules including select kinases (platelet-derived growth factor (PDGF) receptors, protein kinase C, phosphatidylinositol 3-kinase, and Src-like kinases), phospholipase C, sphingomyelin, and even phosphoinositides. More importantly, two different techniques reveal that caveolae function as signal transducing subcompartments of the plasma membrane. PDGF rapidly induces phosphorylation of endothelial cell plasmalemmal proteins residing in caveolae as detected by membrane subfractionation and confocal immunofluorescence microscopy. This PDGF signaling cascade is halted when the caveolar compartment is disassembled by filipin. Finally, in vitro kinase assays show that caveolae contain most of the intrinsic tyrosine kinase activity of the plasma membrane. As signal transducing organelles, caveolae organize a distinct set of signaling molecules to permit direct regionalized signal transduction within their boundaries.