Transforming growth factor- (TGF-) signals through three highly conserved cell surface receptors, the type III TGF- receptor (TRIII), the type II TGF- receptor (TRII), and the type I TGF- receptor (TRI) to regulate diverse cellular processes including cell proliferation, differentiation, migration, and apoptosis. Although TRI and TRII undergo ligand-independent endocytosis by both clathrin-mediated endocytosis, resulting in enhanced signaling, and clathrin-independent endocytosis, resulting in receptor degradation, the mechanism and function of TRIII endocytosis is poorly understood. TRIII is a heparan sulfate proteoglycan with a short cytoplasmic tail that functions as a TGF- superfamily co-receptor, contributing to TGF- signaling through mechanisms yet to be fully defined. We have reported previously that TRIII endocytosis, mediated by a novel interaction with arrestin-2, results in decreased TGF- signaling. Here we demonstrate that TRIII undergoes endocytosis in a ligand and glycosaminoglycan modification-independent and cytoplasmic domain-dependent manner, with the interaction of Thr-841 in the cytoplasmic domain of TRIII with -arrestin2 enhancing TRIII endocytosis. TRIII undergoes both clathrin-mediated and clathrin-independent endocytosis. Importantly, inhibition of the clathrin-independent, lipid raft pathway, but not of the clathrin-dependent pathway, results in decreased TGF-1 induced Smad2 and p38 phosphorylation, supporting a specific role for clathrin-independent endocytosis of TRIII in regulating both Smad-dependent and Smad-independent TGF- signaling.The TGF- 2 superfamily is composed of more than 30 polypeptide growth factors, including the bone morphogenetic proteins and activins, which regulate cell proliferation, differentiation, adhesion, angiogenesis, and embryonic development (1-4). Three highly conserved and tissue-specific TGF- isoforms signal through heteromeric complexes of three cell surface receptors, the type III TGF- receptor (TRIII, or betaglycan), the type II TGF- receptor (TRII), and the type I TGF- receptor (TRI). Although TRII and TRI are both transmembrane serine/threonine kinase receptors, TRIII is a heparan sulfate proteoglycan with a short cytoplasmic tail that fundamentally contributes to TGF- signaling through mechanisms yet to be defined. TRIII binds all three forms of TGF- ligands specifically; TRII binds TGF-1 and TGF-3 independently, whereas TRI cannot bind ligand on its own. Upon ligand binding, the constitutively active TRII recruits TRI into an active heterotetrameric signaling complex composed of two TRIs and two TRIIs and transphosphorylates the glycine and serine rich region of TRI to activate its kinase function (5). TRI can then phosphorylate C-terminal serine residues on transcription factors known as Smads, specifically the receptorSmads, Smad2 and Smad3, which then associate with the common-Smad, Smad4 (6). This association allows accumulation of the complex into the nucleus and transcription of target genes. ...