Idiopathic pulmonary fibrosis (IPF) is a progressive fibroproliferative disorder refractory to current pharmacological therapies. Fibroblasts isolated from IPF patients display pathological activation of PI3K/Akt caused by low PTEN phosphatase activity. This enables these cells to escape the negative proliferative properties of polymerized collagen. The mechanism underlying low PTEN activity in IPF fibroblasts is unclear, but our prior studies indicate that membrane-associated PTEN expression is decreased in these cells. Caveolin-1 is an integral membrane protein whose expression is decreased in IPF lung tissue, but how low caveolin-1 contributes to pathological fibrosis is incompletely understood. The objective of this study was to examine the hypothesis that caveolin-1 regulates PTEN function in IPF fibroblasts. Here we demonstrate that caveolin-1 expression is a determinant of membrane PTEN levels and show that PTEN interacts with caveolin-1 via its caveolin-1-binding sequence. We demonstrate that caveolin-1 expression is low in IPF fibroblasts and that this correlates with low membrane PTEN levels, whereas overexpression of caveolin-1 restores membrane PTEN levels, inhibits Akt phosphorylation, and suppresses proliferation. We demonstrate that caveolin-1 and PTEN expression are low in myofibroblasts within IPF fibroblastic foci. These data indicate that IPF fibroblasts display low caveolin-1 expression, which results in low membrane-associated PTEN expression. This creates a membrane microenvironment depleted of inhibitory phosphatase activity, facilitating the aberrant activation PI3K/Akt and pathological proliferation.