The mechanism by which the Src family of protein-tyrosine kinases (SFKs) regulate mitogenesis and morphological changes induced by platelet-derived growth factor (PDGF) is not well known. The cholesterol-enriched membrane microdomains, caveolae, regulate PDGF receptor signalling in fibroblasts and we examined their role in SFK functions. Here we show that caveolae disruption by membrane cholesterol depletion or expression of the dominant-negative caveolin-3 DGV mutant impaired Src mitogenic signalling including kinase activation, Myc gene induction and DNA synthesis. The impact of caveolae on SFK function was underscored by the capacity of Myc to overcome mitogenic inhibition as a result of caveolae disruption. Using biochemical fractionation we show that caveolae-enriched subcellular membranes regulate the formation of PDGF-receptor-SFK complexes. An additional pool of PDGF-activated SFKs that was insensitive to membrane cholesterol depletion was characterised in non-caveolae fractions. SFK activation outside caveolae was linked to the capacity of PDGF to induce F-actin rearrangements leading to dorsal ruffle formation. Inhibition of phospholipase C gamma (PLCgamma), sphingosine kinase and heterotrimeric Gi proteins implicates a PLC gamma-sphingosine-1-phosphate-Gi pathway for PDGF-induced SFK activation outside caveolae and actin assembly. In addition, the cytoplasmic tyrosine kinase Abl was identified as an important effector of this signalling cascade. We conclude that PDGF may stimulate two spatially distinct pools of SFKs leading to two different biological outcomes: DNA synthesis and dorsal ruffle formation.