It is becoming increasingly apparent that the tumor microenvironment plays a critical role in human breast cancer onset and progression. Therefore, we isolated cancer-associated fibroblasts (CAFs) from human breast cancer lesions and studied their properties, as compared with normal mammary fibroblasts (NFs) isolated from the same patient. Here, we demonstrate that 8 out of 11 CAFs show dramatic downregulation of caveolin-1 (Cav-1) protein expression; Cav-1 is a well-established marker that is normally decreased during the oncogenic transformation of fibroblasts. Next, we performed gene expression profiling studies (DNA microarray) and established a CAF gene expression signature. Interestingly, the expression signature associated with CAFs encompasses a large number of genes that are regulated via the RB-pathway. The CAF gene signature is also predictive of poor clinical outcome in breast cancer patients that were treated with tamoxifen mono-therapy, indicating that CAFs may be useful for predicting the response to hormonal therapy. Finally, we show that replacement of Cav-1 expression in CAFs (using a cell-permeable peptide approach) is sufficient to revert their hyper-proliferative phenotype and prevent RB hyper-phosphorylation. Taken together, these studies highlight the critical role of Cav-1 downregulation in maintaining the abnormal phenotype of human breast cancer-associated fibroblasts.