We have previously reported that keratinocytes defective in glycosylphosphatidylinositol (GPI)-anchor biosynthesis display enhanced TGF-beta responses. These studies implicated the involvement of a 150 kDa GPI-anchored TGF-beta1 binding protein, r150, in modulating TGF-beta signaling. Here, we sought to determine the molecular identity of r150 by affinity purification and microsequencing. Our results identify r150 as CD109, a novel member of the alpha2-macroglobulin (alpha2M)/complement superfamily, whose function has remained obscure. In addition, we have identified a novel CD109 isoform that occurs in the human placenta but not keratinocytes. Biochemical studies show that r150 contains an internal thioester bond, a defining feature of the alpha2M/complement family. Loss and gain of function studies demonstrate that CD109 is a component of the TGF-beta receptor system, and a negative modulator of TGF-beta responses in keratinocytes, as implicated for r150. Our data suggest that CD109 can inhibit TGF-beta signaling independently of ligand sequestration and may exert its effect on TGF-beta signaling by direct modulation of receptor activity. Together, our results linking CD109 function to regulation of TGF-beta signaling suggest that CD109 plays a unique role in the regulation of isoform-specific TGF-beta signaling in keratinocytes.