We previously developed a robust in vitro model system for vascular smooth muscle cell (VSMC) differentiation from neural crest cell line Monc-1 upon transforming growth factor-beta (TGF-beta) induction. Further studies demonstrated that both Smad and RhoA signaling are critical for TGF-beta-induced VSMC development. To identify downstream targets, we performed Affymetrix cDNA array analysis of Monc-1 cells and identified a gene named response gene to complement 32 (RGC-32) to be important for the VSMC differentiation. RGC-32 expression was increased 5-fold after 2 h and 50-fold after 24 h of TGF-beta induction. Knockdown of RGC-32 expression in Monc-1 cells by small interfering RNA significantly inhibited the expression of multiple smooth muscle marker genes, including SM alpha-actin (alpha-SMA), SM22alpha, and calponin. Of importance, the inhibition of RGC-32 expression correlated with the reduction of alpha-SMA while not inhibiting smooth muscle-unrelated c-fos gene expression, suggesting that RGC-32 is an important protein factor for VSMC differentiation from neural crest cells. Moreover, RGC-32 overexpression significantly enhanced TGF-beta-induced alpha-SMA, SM22alpha, and SM myosin heavy chain promoter activities in both Monc-1 and C3H10T1/2 cells. The induction of VSMC gene promoters by RGC-32 appears to be CArG-dependent. These data suggest that RGC-32 controls VSMC differentiation by regulating marker gene transcription in a CArG-dependent manner. Further studies revealed that both Smad and RhoA signaling are important for RGC-32 activation.