Caveolin-1 is the primary component of caveolae and functions in a variety of intracellular activities including membrane trafficking and signal transduction. Epithelial membrane protein 2 (EMP2) is a tetraspan protein recently identified as a novel regulator of caveolin-1 expression. In this study, we analyze the mechanism of EMP2-mediated caveolin-1 regulation. In NIH 3T3 cells and in the human retinal pigment epithelium cell line (ARPE-19), EMP2 regulates caveolin-1 transcription, and more substantially its protein levels. EMP2-mediated down-regulation of caveolin-1 does not affect caveolin-1 translational efficiency, phosphorylation, or proteasome-mediated degradation. Analysis of caveolin-1 protein half-life indicates the EMP2-mediated loss of caveolin-1 occurs rapidly. Protease inhibition and laser confocal microscopy associates this fate with specific intracellular compartmentalization including early lysosomal delivery. These findings elucidate a new mechanism of caveolin-1 regulation and define an additional role for EMP2 as a key regulator of cell membrane composition.