Pancreatic cancer is one of the deadliest cancers due to early rapid metastasis and chemoresistance. Recently, epithelial to mesenchymal transition (EMT) was shown to play a key role in the pathogenesis of pancreatic cancer. To understand the role of caveolin-1 (Cav-1) in EMT, we over-expressed Cav-1 in a pancreatic cancer cell line, Panc 10.05, that does not normally express Cav-1. Here, we show that Cav-1 expression in pancreatic cancer cells induces an epithelial phenotype and promotes cell-cell contact, with increased expression of plasma membrane bound E-cadherin and beta-catenin. Mechanistically, Cav-1 induces Snail downregulation and decreased activation of AKT, MAPK and TGF-beta-Smad signaling pathways. In vitro, Cav-1 expression reduces cell migration and invasion, and attenuates doxorubicin-chemoresistance of pancreatic cancer cells. Importantly, in vivo studies revealed that Cav-1 expression greatly suppresses tumor formation in a xenograft model. Most interestingly, Panc/Cav-1 tumors displayed organized nests of differentiated cells that were totally absent in control tumors. Confirming our in vitro results, these nests of differentiated cells showed reexpression of E-cadherin and beta-catenin at the cell membrane. Thus, we provide evidence that Cav-1 functions as a crucial modulator of EMT and cell differentiation in pancreatic cancer.