Despite the importance of vascular smooth muscle cells in the regulation of blood vessel function, the molecular mechanisms governing their development and differentiation remain poorly understood. Using an in vitro system whereby a pluripotent neural crest cell line (MONC-1) can be induced to differentiate into smooth muscle cells, we isolated a cDNA fragment that was robustly induced during this differentiation process. Sequence analysis revealed high homology to a partial cDNA termed modulator recognition factor 2 (Mrf2). Because the full-length cDNA has not been reported, we cloned the full-length Mrf2 cDNA by cDNA library screening and 5' rapid amplification of cDNA ends and identified two isoforms of Mrf2 (alpha [3.0 kb] and beta [3.7 kb]) that differ in the N-terminus but share the DNA-binding domain. Protein homology analysis suggests that Mrf2 is a member of the AT-rich interaction domain family of transcription factors, which are known to be critically involved in the regulation of development and cellular differentiation. Mrf2alpha and Mrf2beta are highly induced during in vitro differentiation of MONC-1 cells into smooth muscle cells, and Mrf2alpha is expressed in adult mouse cardiac and vascular tissues. To define the function of Mrf2, we overexpressed both isoforms in 3T3 fibroblast cells and observed an induction of smooth muscle marker genes, including smooth muscle alpha-actin and smooth muscle 22alpha. Furthermore, Mrf2alpha and Mrf2beta retarded cellular proliferation. These data implicate Mrf2 as a novel regulator of smooth muscle cell differentiation and proliferation.