The TGF-beta signaling pathway has a complex role in regulating mammary carcinogenesis. Here we demonstrate that the type III TGF-beta receptor (TbetaRIII, or betaglycan), a ubiquitously expressed TGF-beta coreceptor, regulated breast cancer progression and metastasis. Most human breast cancers lost TbetaRIII expression, with loss of heterozygosity of the TGFBR3 gene locus correlating with decreased TbetaRIII expression. TbetaRIII expression decreased during breast cancer progression, and low TbetaRIII levels predicted decreased recurrence-free survival in breast cancer patients. Restoring TbetaRIII expression in breast cancer cells dramatically inhibited tumor invasiveness in vitro and tumor invasion, angiogenesis, and metastasis in vivo. TbetaRIII appeared to inhibit tumor invasion by undergoing ectodomain shedding and producing soluble TbetaRIII, which binds and sequesters TGF-beta to decrease TGF-beta signaling and reduce breast cancer cell invasion and tumor-induced angiogenesis. Our results indicate that loss of TbetaRIII through allelic imbalance is a frequent genetic event during human breast cancer development that increases metastatic potential.