Transforming growth factor‐β (TGF‐β) plays a dual role in hepatocytes, inducing both pro‐ and anti‐apoptotic responses, the balance between which decides cell fate. Survival signals are mediated by the epidermal growth factor receptor (EGFR) pathway, which is activated by TGF‐β. We have previously shown that caveolin‐1 (CAV1) is required for activation of the metalloprotease tumour necrosis factor (TNF)‐α‐converting enzyme/a disintegrin and metalloproteinase 17 (TACE/ADAM17), and hence transactivation of the EGFR pathway. The specific mechanism by which TACE/ADAM17 is activated has not yet been determined. Here we show that TGF‐β induces phosphorylation of sarcoma kinase (Src) in hepatocytes, a process that is impaired in Cav1−/− hepatocytes, coincident with a decrease in phosphorylated Src in detergent‐resistant membrane fractions. TGF‐β‐induced activation of TACE/ADAM17 and EGFR phosphorylation were blocked using the Src inhibitor PP2. Cav1+/+ hepatocytes showed early production of reactive oxygen species (ROS) induced by TGF‐β, which was not seen in Cav1−/− cells. Production of ROS was inhibited by both the NADPH oxidase 1 (NOX1) inhibitor STK301831 and NOX1 knock‐down, which also impaired TACE/ADAM17 activation and thus EGFR phosphorylation. Finally, neither STK301831 nor NOX1 silencing impaired Src phosphorylation, but PP2 blocked early ROS production, showing that Src is involved in NOX1 activation. As expected, inhibition of Src or NOX1 increased TGF‐β‐induced cell death in Cav1+/+ cells. In conclusion, CAV1 is required for TGF‐β‐mediated activation of TACE/ADAM17 through a mechanism that involves phosphorylation of Src and NOX1‐mediated ROS production.