Vascular smooth muscle cell (VSMC) differentiation is important in understanding vascular disease; however, no in vitro model is available. Totipotent mouse embryonic stem (ES) cells were used to establish such a model. To test whether the ES cell-derived smooth muscle cells expressed VSMC-specific properties, the differentiated cells were characterized by 1) morphological analysis, 2) gene expression, 3) immunostaining for VSMC-specific proteins, 4) expression of characteristic VSMC ion channels, and 5) formation of [Ca2+](i) transients in response to VSMC-specific agonists. Treatment of embryonic stem cell-derived embryoid bodies with retinoic acid and dibutyryl-cyclic adenosine monophosphate (db-cAMP) induced differentiation of spontaneously contracting cell clusters in 67% of embryoid bodies compared with 10% of untreated controls. The highest differentiation rate was observed when retinoic acid and db-cAMP were applied to the embryoid bodies between days 7 and 11 in combination with frequent changes of culture medium. Other protocols with retinoic acid and db-cAMP, as well as single or combined treatment with VEGF, ECGF, bFGF, aFGF, fibronectin, matrigel, or hypoxia did not influence the differentiation rate. Single-cell RTPCR and sequencing of the PCR products identified myosin heavy chain (MHC) splice variants distinguishing: between gut and VSMC isoforms. RT-PCR with VSMC-specific MHC primers and immunostaining confirmed the presence of VSMC transcripts and MHC protein. Furthermore, VSMC expressing MHC had typical ion channels and responded to specific agonists with an increased [Ca2+](i). Here we present a retinoic acid + dbcAMP-inducible embryonic stem cell model of in vitro vasculogenesis. ES cell-derived cells expressing VSMC-specific MHC and functional VSMC properties may be a suitable system to study mechanisms of VSMC differentiation.