The CD44 gene codes for a family of alternatively spliced, multifunctional adhesion molecules that participate in extracellular matrix binding, lymphocyte activation, cell migration, and tumor metastasis. In a mouse model of transplant-associated arteriosclerosis, CD44 protein was induced in the neointima of allografted vessels and colocalized with a subset of proliferating vascular smooth muscle cells (SMC). To elucidate the molecular mechanisms regulating CD44 expression in this model, we investigated the regulation of CD44 gene expression by interleukin (IL)-1beta. Treatment of rat aortic SMC with IL-1beta resulted in a 5.3-fold increase in cell surface CD44 expression. Northern analysis showed that IL-1beta promoted a dose- and time-dependent induction of CD44 mRNA which reached 6.6-fold after 48 h, and nuclear run-on analysis showed that IL-1beta increased the rate of CD44 gene transcription within 8 h of stimulation. In transient reporter gene transfection experiments in rat aortic SMC, a 1.4-kilobase fragment of the mouse CD44 5'-flanking sequence mediated this response to IL-1beta. Regulation of CD44 gene expression by the proinflammatory cytokine IL-1beta may contribute to SMC phenotypic modulation in the pathogenesis of arteriosclerosis.