The Notch signaling pathway plays a crucial role in specifying cellular fates by interaction between cellular neighbors; however, the molecular mechanism underlying smooth muscle cell (SMC) differentiation by Notch signaling has not been well characterized. Here we demonstrate that Jagged1-Notch signaling promotes SMC differentiation from mesenchymal cells. Overexpression of the Notch intracellular domain, an activated form of Notch, up-regulates the expression of multiple SMC marker genes including SMC-myosin heavy chain (Sm-mhc) in mesenchymal 10T1/2 cells, but not in non-mesenchymal cells. Physiological Notch stimulation by its ligand Jagged1, but not Dll4, directly induces Sm-mhc expression in 10T1/2 cells without de novo protein synthesis, indicative of a ligand-selective effect. Jagged1-induced expression of SM-MHC was blocked bygamma-secretase inhibitor, N-(N-(3,5-difluorophenyl)-l-alanyl)-S-phenylglycine t-butyl ester, which impedes Notch signaling. Using Rbp-jkappa-deficient cells and site-specific mutagenesis of the SM-MHC gene, we show that such an induction is independent of the myocardin-serum response factor-CArG complex, but absolutely dependent on RBP-Jkappa, a major mediator of Notch signaling, and its cognate binding sequence. Of importance, Notch signaling and myocardin synergistically activate SM-MHC gene expression. Taken together, these data suggest that the Jagged1-Notch pathway constitutes an instructive signal for SMC differentiation through an RBP-Jkappa-dependent mechanism and augments gene expression mediated by the myocardin-SRF-CArG complex. Given that Notch pathway components are expressed in vascular SMC during normal development and disease, Notch signaling is likely to play a pivotal role in such situations to modulate the vascular smooth muscle cell phenotype.