Endocytosis of cell surface receptors is an important regulatory event in signal transduction. The transforming growth factor beta (TGF-beta) superfamily signals to the Smad pathway through heteromeric Ser-Thr kinase receptors that are rapidly internalized and then downregulated in a ubiquitin-dependent manner. Here we demonstrate that TGF-beta receptors internalize into both caveolin- and EEA1-positive vesicles and reside in both lipid raft and non-raft membrane domains. Clathrin-dependent internalization into the EEA1-positive endosome, where the Smad2 anchor SARA is enriched, promotes TGF-beta signalling. In contrast, the lipid raft-caveolar internalization pathway contains the Smad7-Smurf2 bound receptor and is required for rapid receptor turnover. Thus, segregation of TGF-beta receptors into distinct endocytic compartments regulates Smad activation and receptor turnover.