Tumor necrosis factor (TNF)-related apoptosis-inducing ligand (TRAIL) is a member of the TNF family that induces cancer cell death by apoptosis with some selectivity. TRAIL-induced apoptosis is mediated by the transmembrane receptors death receptor 4 (DR4) (also known as TRAIL-R1) and DR5 (TRAIL-R2). TRAIL can also bind decoy receptor 1 (DcR1) (TRAIL-R3) and DcR2 (TRAIL-R4) that fail to induce apoptosis since they lack and have a truncated cytoplasmic death domain, respectively. In addition, DcR1 and DcR2 inhibit DR4- and DR5-mediated, TRAIL-induced apoptosis and we demonstrate here that this occurs through distinct mechanisms. While DcR1 prevents the assembly of the death-inducing signaling complex (DISC) by titrating TRAIL within lipid rafts, DcR2 is corecruited with DR5 within the DISC, where it inhibits initiator caspase activation. In addition, DcR2 prevents DR4 recruitment within the DR5 DISC. The specificity of DcR1- and DcR2-mediated TRAIL inhibition reveals an additional level of complexity for the regulation of TRAIL signaling.