It is proposed that loss of a growth-inhibitory response to transforming growth factor beta (TGFbeta) contributes to breast cancer progression. Because cellular TGFbeta responsiveness often correlates with TGFbeta type II receptor (TGFbeta-IIR) expression, we have examined the cellular distribution of TGFbeta-IIRs in tumor and nontumor mammary epithelial cells. By immunoblot analysis, TGFbeta-IIR was detected both in membrane and cytosolic fractions of MDA-231 tumor cells as well as in normal human breast epithelial cells. The cytosolic protein appeared to be more abundant and was detected as a clear perinuclear staining by immunocytochemistry. The glycosylation patterns of the cytosolic and membrane form were different, indicating distinct receptor pools. The cytosolic TGFbeta-IIR did not bind 125I-labeled TGFbeta1 but had a detectable in vitro and in vivo kinase activity. MCF-7 breast cancer cells express the TGFbeta-IIR mRNA but show undetectable cell surface TGFbeta-IIR protein by affinity cross-linking. However, low levels of TGFbeta-IIR were observed in MCF-7 cytosol. Sequencing of the coding region of TGFbeta-IIR from MCF-7 cells indicated a point mutation (A439V) in a nonconserved region of the kinase domain. When MCF-7 cells were treated with sublethal doses of Adriamycin that induce cell differentiation, the membrane localization of TGFbeta-IIR and TGFbeta response were restored. Our results indicate the presence of a prominent, kinase-active TGFbeta-IIR in the cytosol of several mammary cell lines. This cytosolic pool of receptors is the only detectable one in MCF-7 cells. Loss of wild-type membrane receptors due to defects in trafficking presents a potential new mechanism for escape from negative growth control.