Phenotype regulation of vascular smooth muscle cells (VSMC) is an important requirement in both tissue engineering and balloon angioplasty strategies. In recent years, it has become increasingly evident that the Notch signalling pathway plays a critical role in regulating vascular morphogenesis during development and the transcription of differentiated VSMC and its maturation. In arteries, Notch3 is the predominant receptor on VSMC and, signalling is initiated upon binding to its ligand, Jagged1. However, little is known on how ligand presenting strategies affect Notch signalling and subsequently upregulation of smooth muscle cell differentiation. In this study, using human coronary artery smooth muscle cells (HCASMC) and human coronary artery endothelial cells (HCAEC), we show several lines of evidence that direct heterocellular cell-cell contact is necessary for VSMC differentiation via Notch3 signalling. First, neither the addition of soluble Jagged1 nor Jagged1 immobilized to protein G beads induced HCASMC differentiation in culture. Second, despite the upregulation of Notch3 expression, EC-conditioned medium failed to induce HCASMC differentiation. However, when HCASMC and HCAEC were co-cultured either on opposite sides of porous membrane or when these cells were co-cultured directly, both Notch3 and VSMC differentiation marker proteins were upregulated. These upregulations were abrogated by Jagged1-specific siRNA. This study provides the first direct evidence that contact of HCASMC and HCAEC is required for regulating smooth muscle cell differentiation. These findings may have clinical importance and therapeutic potential for modulating vascular SMC phenotype during various cardiovascular disease states and in tissue engineering.