Caveolins are membrane proteins that are the major coat proteins of caveolae, specialized lipid rafts in the plasma membrane that serve as scaffolding sites for many signaling complexes. Among the many signaling molecules associated with caveolins are the Src tyrosine kinases, whose activation regulates numerous cellular functions including the balance between cell survival and cell death. Several mutations in the muscle-specific caveolin, caveolin-3, lead to a form of autosomal dominant muscular dystrophy referred to as limb girdle muscular dystrophy type 1C (LGMD-1C). One of these mutations (here termed the 'TFT mutation') results in a deletion of a tripeptide (TFT(63-65)) that affects the scaffolding and oligomerization domains of caveolin-3. This mutation causes a 90-95% loss of caveolin-3 protein levels and reduced formation of caveolae in skeletal muscle fibers. However, the effects of this mutation on the specific biochemical processes and cellular functions associated with caveolae have not been elucidated. We demonstrate that the TFT caveolin-3 mutation in post-mitotic skeletal myotubes causes severely reduced localization of caveolin-3 to the plasma membrane and to lipid rafts, and significantly inhibits caveolar function. The TFT mutation reduced the binding of Src to caveolin-3, diminished targeting of Src to lipid rafts, and caused abnormal perinuclear accumulation of Src. Along with these alterations of Src localization and targeting, there was elevated Src activation in myotubes expressing the TFT mutation and an increased incidence of apoptosis in those cells compared with control myotubes. The results of this study demonstrate that caveolin-3 mutations associated with LGMD-1C disrupt normal cellular signal transduction pathways associated with caveolae and cause apoptosis in muscle cells, all of which may reflect pathogenetic pathways that lead to muscle degeneration in these disorders.