In the present study, we aim to elucidate the roles of caveolin-1(Cav-1), a 22 kDa protein in plasma membrane invaginations, in modulating neuronal differentiation of neural progenitor cells (NPCs). In the hippocampal dentate gyrus, we found that Cav-1 knockout mice revealed remarkably higher levels of vascular endothelial growth factor (VEGF) and the more abundant formation of newborn neurons than wild type mice. We then studied the potential mechanisms of Cav-1 in modulating VEGF signaling and neuronal differentiation in isolated cultured NPCs under normoxic and hypoxic conditions. Hypoxic embryonic rat NPCs were exposed to 1% O₂ for 24 h and then switched to 21% O₂ for 1, 3, 7 and 14 days whereas normoxic NPCs were continuously cultured with 21% O₂. Compared with normoxic NPCs, hypoxic NPCs had down-regulated expression of Cav-1 and up-regulated VEGF expression and p44/42MAPK phosphorylation, and enhanced neuronal differentiation. We further studied the roles of Cav-1 in inhibiting neuronal differentiation by using Cav-1 scaffolding domain peptide and Cav-1-specific small interfering RNA. In both normoxic and hypoxic NPCs, Cav-1 peptide markedly down-regulated the expressions of VEGF and flk1, decreased the phosphorylations of p44/42MAPK, Akt and Stat3, and inhibited neuronal differentiation, whereas the knockdown of Cav-1 promoted the expression of VEGF, phosphorylations of p44/42MAPK, Akt and Stat3, and stimulated neuronal differentiation. Moreover, the enhanced phosphorylations of p44/42MAPK, Akt and Stat3, and neuronal differentiation were abolished by co-treatment of VEGF inhibitor V1. These results provide strong evidence to prove that Cav-1 can inhibit neuronal differentiation via down-regulations of VEGF, p44/42MAPK, Akt and Stat3 signaling pathways, and that VEGF signaling is a crucial target of Cav-1. The hypoxia-induced down-regulation of Cav-1 contributes to enhanced neuronal differentiation in NPCs.