Bone morphogenetic proteins (BMPs) signal through the BMP type I and type II receptors to regulate cellular processes, including embryonic development. The type I BMP receptors activin-like kinase (ALK)3 and ALK6 share a high degree of homology, yet possess distinct signaling roles. Here, we report that although the transforming growth factor (TGF)-beta type III receptor (TbetaRIII) enhanced both ALK3 and ALK6 signaling, TbetaRIII more potently enhanced ALK6-mediated stimulation of the BMP-responsive promoters XVent2 and 3GC2, and up-regulation of the early response gene Smad6. In contrast, TbetaRIII specifically enhanced ALK3-mediated up-regulation of the early response gene ID-1. TbetaRIII associated with ALK3 primarily through their extracellular domains, whereas its interaction with ALK6 required both the extracellular and cytoplasmic domains. TbetaRIII, along with its interacting scaffolding protein beta-arrestin2, induced the internalization of ALK6. In contrast, TbetaRIII colocalized with and resulted in the cell surface retention of ALK3, independently of beta-arrestin2. Although complex formation between TbetaRIII, ALK6, and beta-arrestin2 and TbetaRIII/ALK6 internalization resulted in maximal BMP signaling, the TbetaRIII mutant unable to interact with beta-arrestin2, TbetaRIII-T841A, was unable to do so. These studies support a novel role for TbetaRIII in mediating differential ALK3 and ALK6 subcellular trafficking resulting in distinct signaling downstream of ALK3 and ALK6.