Intestinal smooth muscle cells (iSMCs) are a crucial component of the adult gastrointestinal tract and support intestinal differentiation, peristalsis and epithelial homeostasis during development. Despite these crucial roles, the origin of iSMCs and the mechanisms responsible for their differentiation and function remain largely unknown in vertebrates. Here, we demonstrate that iSMCs arise from the lateral plate mesoderm (LPM) in a stepwise process. Combining pharmacological and genetic approaches, we show that TGFβ/Alk5 signaling drives the LPM ventral migration and commitment to an iSMC fate. The Alk5-dependent induction of zeb1a and foxo1a is required for this morphogenetic process: zeb1a is responsible for driving LPM migration around the gut, whereas foxo1a regulates LPM predisposition to iSMC differentiation. We further show that TGFβ, zeb1a and foxo1a are tightly linked together by miR-145. In iSMC-committed cells, TGFβ induces the expression of miR-145, which in turn is able to downregulate zeb1a and foxo1a. The absence of miR-145 results in only a slight reduction in the number of iSMCs, which still express mesenchymal genes but fail to contract. Together, our data uncover a cascade of molecular events that govern distinct morphogenetic steps during the emergence and differentiation of vertebrate iSMCs.