Caveolin-1 (cav-1), a 22-kDa transmembrane scaffolding protein, is the principal structural component of caveolae. Cav-1 regulates critical cell functions including proliferation, apoptosis, cell differentiation, and transcytosis via diverse signaling pathways. Abundant in almost every cell type in the lung, including type I epithelial cells, endothelial cells, smooth muscle cells, fibroblasts, macrophages, and neutrophils, cav-1 plays a crucial role in the pathogenesis of acute lung injury (ALI). ALI and its severe form, acute respiratory distress syndrome (ARDS), are responsible for significant morbidity and mortality in intensive care units, despite improvement in ventilation strategies. The pathogenesis of ARDS is still poorly understood, and therapeutic options remain limited. In this article, we summarize recent data regarding the regulation and function of cav-1 in lung biology and pathology, in particular as it relates to ALI. We further discuss the potential molecular and cellular mechanisms by which cav-1 expression contributes to ALI. Investigating the cellular functions of cav-1 may provide new insights for understanding the pathogenesis of ALI and provide novel targets for therapeutic interventions in the future.