Three distinct isoforms of transforming growth factor beta (TGF-beta) are expressed in mammalian cells. Although many cells respond equivalently to all three isoforms, certain cells respond selectively. Using chimeric proteins in which selected regions of the different isoforms were interchanged, we have identified two distinct functional domains of TGF-beta involved in determining the biological potencies and functions of the molecule. The first domain is important for determining whether TGF-beta can be sequestered by alpha 2-macroglobulin. By replacing aa 45 and 47 of TGF-beta 2 with the corresponding amino acids of TGF-beta 1, sequestration of the TGF-beta molecule by alpha 2-macroglobulin was markedly reduced. The second domain is functionally different from the alpha 2-macroglobulin sequestration site and is important for determining the potency of TGF-beta to inhibit growth of the LS513 human colorectal cancer cell line. Neither the TGF-beta 2/beta 1-(40-47) replacement construct nor a chimera containing aa 1-39 of TGF-beta 2, aa 40-82 of TGF-beta 1, and aa 83-112 of TGF-beta 2 was equivalent to TGF-beta 1 in inhibiting growth of LS513 cells. This fact suggests that additional amino acids outside of the aa 40-82 region are required to specify TGF-beta 1 activity with these cells.