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The focus of this review is to provide an overview of the current state of knowledge of molecular mechanisms/processes that control differentiation of vascular smooth muscle cells (SMC) during normal development and maturation of the vasculature, as well as how these mechanisms/processes are altered in vascular injury or disease. A major challenge in understanding differentiation of the vascular SMC is that this cell can exhibit a wide range of different phenotypes at different stages of development, and even in adult organisms the cell is not terminally differentiated. Indeed, the SMC is capable of major changes in its phenotype in response to changes in local environmental cues including growth factors/inhibitors, mechanical influences, cell-cell and cell-matrix interactions, and various inflammatory mediators. There has been much progress in recent years to identify mechanisms that control expression of the repertoire of genes that are specific or selective for the vascular SMC and required for its differentiated function. One of the most exciting recent discoveries was the identification of the serum response factor (SRF) coactivator gene myocardin that appears to be required for expression of many SMC differentiation marker genes, and for initial differentiation of SMC during development. However, it is critical to recognize that overall control of SMC differentiation/maturation, and regulation of its responses to changing environmental cues, is extremely complex and involves the cooperative interaction of many factors and signaling pathways that are just beginning to be understood. There is also relatively recent evidence that circulating stem cell populations can give rise to smooth muscle-like cells in association with vascular injury and atherosclerotic lesion development, although the exact role and properties of these cells remain to be clearly elucidated. The goal of this review is to summarize the current state of our knowledge in this area and to attempt to identify some of the key unresolved challenges and questions that require further study.