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In a report I'm working on, I have lots of drawings. In the caption of each drawing I write "Figure 1." (or whatever the number may be). It appears that it is indeed correct to capitalize it in the caption.
However, what about when writing in the actual text "as shown in figure 1". Do I capitalize the word figure there?
By calling it "Figure 1" or whatever you're giving it a proper name, so you should capitalize the references too. The same would apply to chapter titles and other documents that you reference.
Figure labels should be capitalized, but references to them should not, according to the Chicago Manual of Style (CMOS).
The Chicago Manual of Style Online (CMOSO) states that "In text, the word figure is typically set roman, lowercased, and spelled out except in parenthetical references ('fig. 10')," as in "'as figure 1 shows . . . ,' 'compare figures 4 and 5'" (3.9).
I was unable to find anything in the CMOSO directly addressing the question of whether to capitalize the figure label, but section 3.23 offers this example: "Figure 3. Detailed stratigraphy and geochronology of the Dubawnt Supergroup." Additionally, my hard copy of the 14th edition of the CMOS specifies that labels should be capitalized.
Different style guides will probably have different things to say about this though. Consistency is the important thing; if you have an in-house style guide, consult that. (If you don't, consider creating or adopting one!)
In most books I've seen it capitalized. In some I've seen it also made bold and in parenthesis (See below:). I suspect the key point is to make it stand out a little, which capitalization alone does accomplish.
This system is called the z-index (Figure 7.4).
For what it's worth, The Legal Writing Handbook: Analysis, Research, and Writing, Fifth Edition, by Oates and Enquist (Aspen Publishers/Wolters Kluwer, 2010) capitalizes in-text references to diagrams and charts as follows: "Chart 6.1 points out . . .." [no italics; capital C at sentence-beginning and within sentence]. When the book refers to the Practice Book that supplements the text, it double-spaces before and after an inclusion and says, for example, "See Exercise 5C in the [all in italics] Practice Book [no italics]." Hope this helps.
