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