The type III transforming growth factor  (TGF) receptor (TRIII) binds both TGF and inhibin with high affinity and modulates the association of these ligands with their signaling receptors. However, the significance of TRIII signaling in vivo is not known. In this study, we have sought to determine the role of TRIII during development. We identified the predominant expression sites of ⌻RIII mRNA as liver and heart during midgestation and have disrupted the murine TRIII gene by homologous recombination. Beginning at embryonic day 13.5, mice with mutations in ⌻RIII developed lethal proliferative defects in heart and apoptosis in liver, indicating that TRIII is required during murine somatic development. To assess the effects of the absence of TRIII on the function of its ligands, primary fibroblasts were generated from TRIII-null and wild-type embryos. Our results indicate that TRIII deficiency differentially affects the activities of TGF ligands. Notably, TRIII-null cells exhibited significantly reduced sensitivity to TGF2 in terms of growth inhibition, reporter gene activation, and Smad2 nuclear localization, effects not observed with other ligands. These data indicate that TRIII is an important modulator of TGF2 function in embryonic fibroblasts and that reduced sensitivity to TGF2 may underlie aspects of the TRIII mutant phenotype.Members of the transforming growth factor  (TGF) family are potent regulators of multiple cellular functions, including cell proliferation, differentiation, migration, and death (35, 64). As such, the TGFs are critical regulators of the growth and morphogenesis of a variety of tissues. Three TGF isoforms (TGF1 to -3) have been described in mammals and are encoded by distinct genes (36). Although the three ligands have similar biological activities in many in vitro assays, null mutations in the three genes result in mice with distinct phenotypes, suggesting that each ligand has a unique role during murine somatic development (14,42,50). In mammalian cells, the diverse actions of the TGFs are mediated by two distinct type I and type II serine/threonine kinase receptors (TRI and TRII, respectively), which are expressed on most cell types and tissues (35). TRI and TRII can form a latent receptor complex, and ligand binding is required for the activation of the receptor complex (65). Upon TGF binding, the receptors rotate relatively within the complex (65, 66), resulting in phosphorylation and activation of TRI by the constitutively active and autophosphorylated TRII (62). The activated TRI then directly signals to downstream intracellular substrates, e.g., Smads (21, 61).Many other cell surface receptors have been identified (64). Among them is the type III TGF receptor TRIII, which binds to all three TGFs (32). In contrast to the type I and II receptors, TRIII, also known as betaglycan, appears dispensable for TGF-mediated signal transduction since most cells that lack functional TRIII still respond to TGF (8). The murine form of TRIII is an 850-...