The glucagon-like peptide 1 receptor (GLP-1R) mediates important effects on cell function and glucose homeostasis, and is one of the most promising therapeutic targets for Type 2, and possibly Type 1, diabetes. Yet, little is known regarding the molecular and cellular mechanisms that regulate its function. Therefore, we examined the cellular trafficking of the GLP-1R and the relation between receptor localization and signaling activity. In resting HEK293 and insulinoma MIN6 cells, a fully functional GFP-tagged GLP-1R was localized both at the cell membrane and in highly mobile intracellular compartments. Real-time confocal fluorescence microscopy allowed direct visualization of constitutive cycling of the receptor. Overexpression of K44A-dynamin increased the number of functional receptors at the cell membrane. Immunoprecipitation, sucrose sedimentation and microscopy observations demonstrated that the GLP-1R localizes in lipid rafts and interacts with caveolin-1. This interaction is necessary for membrane localization of the GLP-1R, since over-expression of a dominant negative form of caveolin-1 (P132L-cav1) or specific mutations within the putative GLP-1R's caveolin-1 binding domain completely inhibited GLP-1 binding and activity. Upon agonist stimulation, the GLP-1R underwent rapid and extensive endocytosis independently from arrestins but in association with caveolin-1. Finally, GLP-1R-stimulated activation of ERK1/2, that involves transactivation of EGF receptors, required lipid raft integrity. In summary, the interaction of the GLP-1R with caveolin-1 regulates sub-cellular localization, trafficking and signaling activity. This study provides further evidence of the key role of accessory proteins in specifying the cellular behavior of GPCRs.