Disruption of the alveolar-capillary barrier is a hallmark of acute respiratory distress syndrome (ARDS) that leads to accumulation protein-rich edema in the alveolar space often resulting in comparable protein concentrations in alveolar edema and plasma and causing deleterious remodeling. Patients who survive ARDS have approximately three-times lower protein concentrations in the alveolar edema than non-survivors, thus, the ability to remove excess protein from the alveolar space may be critical for a positive outcome. We have recently shown that clearance of albumin from the alveolar space is mediated by megalin, a 600 kDa transmembrane endocytic receptor and member of the low-density lipoprotein receptor superfamily. In the currents study, we investigate the molecular mechanisms by which TGF-β, a key molecule of ARDS pathogenesis, drives downregulation of megalin expression and function. TGF-β treatment led to shedding and regulated intramembrane proteolysis of megalin at the cell surface and to a subsequent increase in intracellular megalin c-terminal fragment abundance resulting in transcriptional downregulation of megalin. Activity of classical protein kinase C enzymes and -secretase was required for the TGF-β-induced megalin downregulation. Furthermore, TGF-β-induced shedding of megalin was mediated by matrix metallo-proteases (MMPs)-2, -9 and -14. Silencing of either of these MMPs stabilized megalin at the cell surface after TGF-β treatment and restored normal albumin transport. Moreover, a direct interaction of megalin with MMP-2 and -14 was demonstrated, suggesting that these MMPs may function as novel sheddases of megalin. Further understanding of these mechanisms may lead to novel therapeutic approaches for the treatment of ARDS.