Smooth muscle cells (SMCs) possess remarkable phenotypic plasticity that allows rapid adaptation to fluctuating environmental cues. For example, vascular SMCs undergo profound changes in their phenotype during neointimal formation in response to vessel injury or within atherosclerotic plaques. Recent studies have shown that interaction of serum response factor (SRF) and its numerous accessory cofactors with CArG box DNA sequences within promoter chromatin of SMC genes is a nexus for integrating signals that influence SMC differentiation in development and disease. During development, SMC-restricted sets of posttranslational histone modifications are acquired within the CArG box chromatin of SMC genes. These modifications in turn control the chromatin-binding properties of SRF. The histone modifications appear to encode a SMC-specific epigenetic program that is used by extracellular cues to influence SMC differentiation, by regulating binding of SRF and its partners to the chromatin template. Thus, SMC differentiation is dynamically regulated by the interplay between SRF accessory cofactors, the SRF-CArG interaction, and the underlying histone modification program. As such, the inherent plasticity of the SMC lineage offers unique glimpses into how cellular differentiation is dynamically controlled at the level of chromatin within the context of changing microenvironments. Further elucidation of how chromatin regulates SMC differentiation will undoubtedly yield valuable insights into both normal developmental processes and the pathogenesis of several vascular diseases that display detrimental SMC phenotypic behavior.