Glomerular matrix accumulation is a hallmark of diabetic renal disease. The serine/threonine protein kinase C β1 (PKCβ1) mediates glucose-induced Akt S473 phosphorylation, RhoA activation, transforming growth factor β1 (TGFβ1) upregulation, and finally leads to matrix upregulation in mesangial cells (MCs). It has been reported that glucose-induced PKCβ1 activation is dependent on caveolin-1 and the presence of intact caveolae in MCs, however, whether activated PKCβ1 regulate caveolin-1 expression and phosphorylation is unknown. Here, we show that although caveolin-1 protein level had no significant change, PKCβ specific inhibitor LY333531 blocked caveolin-1 Y14 phosphorylation in high glucose (HG)-treated MCs and in the renal cortex of diabetic rats. Src specific inhibitor SU6656 prevented HG-induced association between PKCβ1 and caveolin-1, and PKCβ1 membrane translocation, whereas PKCβ1 siRNA failed to block Src activation, indicating that Src kinase is the upstream of PKCβ1 activation. Although PKCβ-specific inhibitor LY333531 blocked PKCβ1 membrane translocation, it had no effect on PKCβ1/caveolin-1 association, suggesting that PKCβ1 activation requires interaction of caveolin-1 and PKCβ1. PKCβ1-mediated Akt S473 phosphorylation, RhoA activation and fibronectin upregulation in response to HG were prevented by Src specific inhibitor SU6656 and nonphosphorylatable mutant caveolin-1 Y14A. In conclusion, Src activation by HG mediates PKCβ1/caveolin-1 association and PKCβ1 activation, which assists in caveolin-1 Y14 phosphorylation by Src kinase. The downstream effects including Akt S473 phosphorylation, RhoA activation and fibronectin upregulation require caveolin-1 Y14 phosphorylation. Caveolin-1 is thus important mediator of the profibrogenic process in diabetic renal disease.