Transforming growth factor (TGF)-beta1 is an important cytokine involved in various diseases. However, the molecular mechanism whereby TGF-beta1 signaling modulates the regulatory network for smooth muscle gene transcription remains largely unknown. To address this question, we previously identified a Smad-binding element (SBE) in the SM22alpha promoter as one of the TGF-beta1 response elements. Here, we show that mutation of the SBE reduces the activation potential of a SM22alpha promoter in transgenic mice during embryogenesis. Chromatin immunoprecipitation assays reveal that TGF-beta1 induces Smad3 binding to the SM22alpha promoter in vivo. A multimerized SBE promoter responsive to TGF-beta1 signaling is highly activated by Smad3 but not by the closely related Smad2. Intriguingly, myocardin (Myocd), a known CArG box-dependent serum response factor coactivator, participates in Smad3-mediated TGF-beta1 signaling and synergistically stimulates Smad3-induced SBE promoter activity independent of the CArG box; no such synergy is seen with Smad2. Importantly, Myocd cooperates with Smad3 to activate the wild-type SM22alpha, SM myosin heavy chain, and SMalpha-actin promoters; they also activate the CArG box-mutated SM22alpha promoter as well as the CArG box-independent aortic carboxypeptidase-like protein promoter. Immunopreciptiation assays reveal that Myocd and Smad3 directly interact both in vitro and in vivo. Mutagenesis studies indicate that the C-terminal transactivation domains of Myocd and Smad3 are required for their functional synergy. These results reveal a novel regulatory mechanism whereby Myocd participates in TGF-beta1 signal pathway through direct interaction with Smad3, which binds to the SBEs. This is the first demonstration that Myocd can act as a transcriptional coactivator of the smooth muscle regulatory network in a CArG box-independent manner.