Directional cell migration is crucially dependent on the spatiotemporal control of intracellular signalling events. These events regulate polarized actin dynamics, resulting in protrusion at the front of the cell and contraction at the rear. The actin cytoskeleton is regulated through signalling by Rho-like GTPases, such as RhoA, which stimulates myosin-based contractility, and CDC42 and Rac1, which promote actin polymerization and protrusion. Here, we show that Rac1 binds the adapter protein caveolin-1 (Cav1) and that Rac1 activity promotes Cav1 accumulation at Rac1-positive peripheral adhesions. Using Cav1-deficient mouse fibroblasts and depletion of Cav1 expression in human epithelial and endothelial cells mediated by small interfering RNA and short hairpin RNA, we show that loss of Cav1 induces an increase in Rac1 protein and its activated, GTP-bound form. Cav1 controls Rac1 protein levels by regulating ubiquitylation and degradation of activated Rac1 in an adhesion-dependent fashion. Finally, we show that Rac1 ubiquitylation is not required for effector binding, but regulates the dynamics of Rac1 at the periphery of the cell. These data extend the canonical model of Rac1 inactivation and uncover Cav1-regulated polyubiquitylation as an additional mechanism to control Rac1 signalling.