Betaglycan, also known as the TGF-beta type III receptor, is a membrane-anchored proteoglycan that presents TGF-beta to the type II signaling receptor, a transmembrane serine/threonine kinase. The betaglycan extracellular region, which can be shed by cells into the medium, contains a NH2-terminal domain related to endoglin and a COOH-terminal domain related to uromodulin, sperm receptors Zp2 and 3, and pancreatic secretory granule GP-2 protein. We identified residues Ser535 and Ser546 in the uromodulin-related region as the glycosaminoglycan (GAG) attachment sites. Their mutation to alanine prevents GAG attachment but does not interfere with betaglycan stability or ability to bind and present TGF-beta to receptor II. Using a panel of deletion mutants, we found that TGF-beta binds to the NH2-terminal endoglin-related region of betaglycan. The remainder of the extracellular domain and the cytoplasmic domain are not required for presentation of TGF-beta to receptor II; however, membrane anchorage is required. Soluble betaglycan can bind TGF-beta but does not enhance binding to membrane receptors. In fact, recombinant soluble betaglycan acts as potent inhibitor of TGF-beta binding to membrane receptors and blocks TGF-beta action, this effect being particularly pronounced with the TGF-beta 2 isoform. The results suggest that release of betaglycan into the medium converts this enhancer of TGF-beta action into a TGF-beta antagonist.