The Receptor for Advanced Glycation End products (RAGE) and its ligands have been implicated in the activation of oxidant stress and inflammatory pathways in vascular smooth muscle cells (VSMC) leading to the initiation and augmentation of atherosclerosis. Here we report that non-receptor Src tyrosine kinase and the membrane protein Caveolin-1 (Cav-1) play key role in the activation of RAGE by S100B in VSMC. S100B increased the activation of Src kinase and tyrosine phosphorylation of Caveolin-1 in VSMC. A RAGE-specific antibody blocked both these effects. An inhibitor of Src kinase, PP2, significantly blocked S100B induced activation of Src kinase, mitogen activated protein kinases, transcription factors NF-kB and STAT3, superoxide production, tyrosine phosphorylation of Cav-1, VSMC migration, and expression of the pro-inflammatory genes MCP-1 and IL-6. Cholesterol depletion also inhibited S100B-induced effects indicating the requirement for intact caveolae in RAGE specific signaling. Nucleofection of either a Src dominant negative mutant, or a Cav-1 mutant lacking the scaffolding domain, or Cav-1 shRNA significantly reduced S100B induced inflammatory gene expression in VSMC. Furthermore, VSMC derived from insulin resistant and diabetic db/db mice displayed increased RAGE expression, Src activation and migration compared to those from control db/+ mice. The RAGE antibody blocked enhanced migration in db/db cells. These studies demonstrate for the first time that, in VSMC, Src kinase and Cav-1 play important role in RAGE mediated inflammatory gene expression and migration, key events associated with diabetic vascular complications.