The hematopoietic cytokine granulocyte-macrophage colony-stimulating factor (GM-CSF) mediates its activity through binding to cell-surface receptors. The high-affinity GM-CSF receptor (GMR) consists of two transmembrane-anchored subunits: a ligand-specific, low-affinity subunit (GMRalpha); and a signal-transducing beta-subunit (GMRbeta). The human GMRalpha subunit also exists in a soluble isoform (SOLalpha) which antagonizes GM-CSF activity in vitro. Previous studies by us have shown that coexpression of SOLalpha and a mutated GMRbeta in BHK cells results in retention of SOLalpha on the cell surface and the formation of an intermediate affinity binding complex (Kd approximately 300 pM). This paper investigates the mechanism of the retention of SOLalpha on the cell surface. The data demonstrate that SOLalpha is anchored by a direct, ligand-independent interaction with GMRbeta which also occurs when SOLalpha is coexpressed with wild-type GMRbeta. However, SOLalpha and wild-type GMRbeta form a complex which binds GM-CSF with high affinity (Kd = 39 pM), indistinguishable from the binding characteristics of the TMalpha/GMRbeta complex. The experiments further reveal that the interaction between SOLalpha and GMRbeta is abrogated by removal of the unique 16 amino acid carboxyl-terminal domain of SOLalpha. Specific mutation of cysteine 323 in this carboxyl-domain to alanine also eliminates the cell-surface retention of SOLalpha identifying this residue as being necessary for the formation of the SOLalpha/GMRbeta complex.