Although a critical component of vascular disease is modulation of the differentiated state of vascular smooth muscle cells (SMC), the mechanisms governing SMC differentiation are relatively poorly understood. We have previously shown that E-boxes and the ubiquitously expressed class I basic helix-loop-helix (bHLH) proteins, including E2-2 and E12, are important in regulation of the SMC differentiation marker gene, the SM alpha-actin gene. The aim of the present study was to identify proteins that bind to class I bHLH proteins in SMC and modulate transcriptional regulation of SMC differentiation marker genes. Herein we report that members of the protein inhibitor of activated STAT (PIAS) family interact with class I bHLH factors as well as serum response factor (SRF). PIAS1 interacted with E2-2 and E12 based on yeast two-hybrid screens, mammalian two-hybrid assays, and/or coimmunoprecipitation assays. Overexpression of PIAS1 significantly activated the SM alpha-actin promoter and mRNA expression, as well as SM myosin heavy chain and SM22alpha, whereas a small interfering RNA for PIAS1 decreased activity of these promoters, as well as endogenous mRNA expression, and SRF binding to SM alpha-actin promoter within intact chromatin in cultured SMC. Of significance, PIAS1 bound to SRF and activated SM alpha-actin promoter expression in wild-type but not SRF(-/-) embryonic stem cells. These results provide novel evidence that PIAS1 modulates transcriptional activation of SMC marker genes through cooperative interactions with both SRF and class I bHLH proteins.