Betaglycan is a membrane-anchored proteoglycan that binds transforming growth factor-beta (TGF-beta) via its core protein. A soluble form of betaglycan can be released by proteolytic cleavage (also known as shedding) of the membrane-bound form, yielding soluble betaglycan. The mechanism leading to the generation of soluble betaglycan is poorly understood. Because the membrane and soluble forms of betaglycan have opposite effects regulating the availability of TGF-beta, it is important to characterize the shedding of betaglycan further. Here we present evidence showing that in certain cell types, pervanadate, a general tyrosine phosphatase inhibitor, induces the release of the previously described fragment that encompasses almost the entire extracellular domain of betaglycan (sBG-120). In addition, treatment with pervanadate unveils the existence of a novel 90-kDa fragment (sBG-90). Noticeably, the cleavage that generates sBG-90 is mediated by a tissue inhibitor of metalloprotease-2-sensitive protease. Overexpression of all membrane type matrix metalloproteases (MT-MMPs) described to date indicates that MT1-MMP and MT3-MMP are endowed with ability to generate sBG-90. Furthermore, the patterns of expression of different MT-MMPs in the cell lines used in this study suggest that MT1-MMP is the protease involved in the shedding of sBG-90. Overexpression of MT1-MMP in COS-1 cells, which do not express detectable levels of this metalloprotease, confirms the feasibility of this hypothesis. Unexpectedly, during the course of these experiments, we observed that MT2-MMP decreases the levels of MT1-MMP and betaglycan. Finally, binding competition experiments indicate that, similar to the wild type membrane betaglycan, sBG-90 binds the TGF-beta2 isoform with greater affinity than TGF-beta1, suggesting that once released, it could affect the cellular availability of TGF-beta.