Transforming growth factor  (TGF-) is implicated in the regulation of smooth muscle cell (SMC) differentiation. We previously identified a novel TGF- control element (TCE) in the promoters of SMC differentiation marker genes, including ␣-smooth muscle actin and SM22␣. In this study, the importance of the TCE in regulation of SM22␣ gene expression in vivo was investigated by mutating it within the context of a mouse SM22␣ promoter-lacZ transgenic construct. Mutation of the TCE completely abolished SM22␣ promoter activity in arterial SMCs as well as in developing heart and skeletal muscle. To identify the transcription factor(s) binding to the TCE, we performed yeast one-hybrid cloning analysis and identified gut-enriched Krü ppellike factor (GKLF). However, cotransfection studies in cultured cells showed that GKLF repressed the TGF--dependent increases in SM22␣ and ␣-smooth muscle actin promoter activities. Furthermore, GKLF was not highly expressed in differentiated SMCs in vivo, and TGF- down-regulated GKLF expression in dedifferentiated cultured SMCs. In contrast, overexpression of a related factor (BTEB2) transactivated SM22␣ promoter activity. Thus, our findings suggest a reciprocal role for related Krü ppel-like transcription factors in the regulation of SMC differentiation through a TCE-dependent mechanism.