Aims: Diabetes-induced vascular complications are associated with vascular smooth muscle cell (VSMC) phenotypic modulation, switching from a contractile to a synthetic-proliferative phenotype. Loss of caveolin-1 is involved with proliferation of VSMCs. We tested the hypothesis that mesenteric VSMCs from type 2 diabetic Goto-Kakizaki (GK) rat undergo phenotypic modulation and it is linked to decreased caveolin-1 expression. Methods: VSMCs were isolated from mesenteric arteries from GK rats and age-matched control Wistar rats. Western blotting was used to determine expression of target proteins such as caveolin-1, calponin (marker of differentiation), and proliferating cell nuclear antigen (PCNA, marker of proliferation). In addition, we measured intracellular reactive oxygen species (ROS) production using H2DCF-DA and activation of extracellular signal-regulated kinase (ERK1/2) by western blotting in VSMCs from GK stimulated with lipopolysaccharide (LPS), an endotoxin upregulated in diabetes. Results: Mesenteric VSMCs from diabetic GK rats exhibited decreased caveolin-1 and calponin expression and increased PCNA expression compared to control. Increased levels of ROS and phospho-ERK1/2 expression were also found in GK VSMCs. LPS augmented ROS and phosphorylated ERK1/2 levels to a greater extent in GK VSMCs than in control. Likewise, high glucose decreased caveolin-1 and calponin expression, increased PCNA expression and augmented ROS production in control mesenteric VSMCs. Conclusion: These results suggest that mesenteric VSMCs from diabetic GK rats undergo phenotypic modulation and it is associated with decreased caveolin-1 expression. These alterations may be due to enhanced inflammatory stimuli and glucose levels present in diabetic milieu.