Betaglycan is a coreceptor for members of the transforming growth factor beta (TGF-beta) superfamily. Mutagenesis has identified two ligand binding regions, one at the membrane-distal and the other at the membrane-proximal half of the betaglycan ectodomain. Here we show that partial plasmin digestion of soluble betaglycan produces two proteolysis-resistant fragments of 45 and 55 kDa, consistent with the predicted secondary structure, which indicates an intervening nonstructured linker region separating the highly structured N- and C-terminal domains. Amino terminal sequencing indicates that the 45 and 55 kDa fragments correspond, respectively, to the membrane-distal and -proximal regions. Plasmin treatment of membrane betaglycan results in the production of equivalent proteolysis-resistant fragments. The 45 and 55 kDa fragments, as well as their recombinant soluble counterparts, Sol Delta10 and Sol Delta11, bind TGF-beta, but nonetheless, compared to intact soluble betaglycan, have a severely diminished ability to block TGF-beta activity. Surface plasmon resonance (SPR) analysis indicates that soluble betaglycan has K(d)'s in the low nanomolar range for the three TGF-beta isoforms, while those for Sol Delta10 and Sol Delta11 are 1-2 orders of magnitude higher. SPR analysis further shows that the K(d)'s of Sol Delta11 are not changed in the presence of Sol Delta10, indicating that the high affinity of soluble betaglycan is a consequence of tethering the domains together. Overall, these results suggest that betaglycan ectodomain exhibits a bilobular structure in which each lobule folds independently and binds TGF-beta through distinct nonoverlapping interfaces and that linker modification may be an approach to improve soluble betaglycan's TGF-beta neutralizing activity.