Epithelial cells in vivo form tight cell-cell associations that spatially separate distinct apical and basolateral domains. These domains provide discrete cellular processes essential for proper tissue and organ development. Using confocal imaging and selective plasma membrane domain activation, the type I and type II transforming growth factor-beta (TGFbeta) receptors were found to be localized specifically at the basolateral surfaces of polarized Madin-Darby canine kidney (MDCK) cells. Receptors concentrated predominantly at the lateral sites of cell-cell contact, adjacent to the gap junctional complex. Cytoplasmic domain truncations for each receptor resulted in the loss of specific lateral domain targeting and dispersion to both the apical and basal domains. Whereas receptors concentrate basolaterally in regions of direct cell-cell contact in nonpolarized MDCK cell monolayers, receptor staining was absent from areas of noncell contact. In contrast to the defined basolateral polarity observed for the TGFbeta receptor complex, TGFbeta ligand secretion was found to be from the apical surfaces. Confocal imaging of MDCK cells with an antibody to TGFbeta1 confirmed a predominant apical localization, with a stark absence at the basal membrane. These findings indicate that cell adhesion regulates the localization of TGFbeta receptors in polarized epithelial cultures and that the response to TGFbeta is dependent upon the spatial distribution and secretion of TGFbeta receptors and ligand, respectively.