The process of vascular smooth muscle cell (vSMC) differentiation is critical to embryonic angiogenesis. However, despite its importance, the vSMC differentiation program remains largely undefined. Murine gene disruption studies have identified several gene products that are necessary for vSMC differentiation, but these methodologies cannot establish whether or not a factor is sufficient to initiate the differentiation program. A gain-of-function system consisting of normal vSMC progenitor cells would serve as a useful complement to whole animal loss-of-function studies. We use such a system here, namely freshly isolated rat neural crest stem cells (NCSCs), to show that activation of the calcineurin signaling pathway is sufficient to drive these cells toward a smooth muscle fate. In addition, we present data suggesting that transforming growth factor (TGF)-beta1, which also causes NCSCs to differentiate into smooth muscle, activates calcineurin signaling in NCSCs, leading to a model in which activation of calcineurin signaling is the mechanism by which TGF-beta1 causes SMC differentiation in these cells.