Transforming growth factor (TGF) β1, β2, and β3 (TGF-β1-TGF-β3, respectively) are small secreted signaling proteins that each signal through the TGF-β type I and type II receptors (TβRI and TβRII, respectively). However, TGF-β2, which is well-known to bind TβRII several hundred-fold more weakly than TGF-β1 and TGF-β3, has an additional requirement for betaglycan, a membrane-anchored nonsignaling receptor. Betaglycan has two domains that bind TGF-β2 at independent sites, but how it binds TGF-β2 to potentiate TβRII binding and how the complex with TGF-β, TβRII, and betaglycan undergoes the transition to the signaling complex with TGF-β, TβRII, and TβRI are not understood. To investigate the mechanism, the binding of the TGF-βs to the betaglycan extracellular domain, as well as its two independent binding domains, either directly or in combination with the TβRI and TβRII ectodomains, was studied using surface plasmon resonance, isothermal titration calorimetry, and size-exclusion chromatography. These studies show that betaglycan binds TGF-β homodimers with a 1:1 stoichiometry in a manner that allows one molecule of TβRII to bind. These studies further show that betaglycan modestly potentiates the binding of TβRII and must be displaced to allow TβRI to bind. These findings suggest that betaglycan functions to bind and concentrate TGF-β2 on the cell surface and thus promote the binding of TβRII by both membrane-localization effects and allostery. These studies further suggest that the transition to the signaling complex is mediated by the recruitment of TβRI, which simultaneously displaces betaglycan and stabilizes the bound TβRII by direct receptor-receptor contact.