Although plasma membrane domains, such as caveolae, provide an organizing principle for signaling pathways and cholesterol homeostasis in the cell, relatively little is known regarding specific mechanisms, whereby intracellular lipid-binding proteins are targeted to caveolae. Therefore, the interaction between caveolin-1 and sterol carrier protein-2 (SCP-2), a protein that binds and transfers both cholesterol and signaling lipids (e.g., phosphatidylinositides and sphingolipids), was examined by yeast two-hybrid, in vitro binding and fluorescence resonance energy transfer (FRET) analyses. Results of the in vivo and in vitro assays identified for the first time the N-terminal amino acids (aa) 1-32 amphipathic alpha helix of SCP-2 functionally interacted with caveolin-1. This interaction was independent of the classic caveolin-1 scaffolding domain, in which many signaling proteins interact. Instead, SCP-2 bound caveolin-1 through a new domain identified in the N-terminal domain of caveolin-1 between aa 34-40. Modeling studies suggested that electrostatic interactions between the SCP-2 N-terminal aa 1-32 amphipathic alpha-helical domain (cationic, positively charged face) and the caveolin-1 N-terminal aa 33-59 alpha helix (anionic, negatively charged face) may significantly contribute to this interaction. These findings provide new insights on how SCP-2 enhances cholesterol retention within the cell as well as regulates the distribution of signaling lipids, such as phosphoinositides and sphingolipids, at plasma membrane caveolae.