The distribution of a modulated squeezed state over a quantum channel is the basis for quantum key distribution (QKD) with a squeezed state. In this Letter, a modulated squeezed state is distributed over a lossy channel. The Wigner function of the distributed state is measured to observe the evolution of the quantum state over a lossy channel, which shows that the squeezing level and the displacement amplitude of the quantum state are decreased along with the increase of the channel loss. We als