Mouse embryonic stem-derived cells were recently shown to differentiate into endothelial and smooth muscle cells. In the present study, we investigated whether human umbilical vein endothelium-derived cells retain the potential to differentiate into smooth muscle cells. Examination of biochemical markers, including basic calponin, SM22alpha, prostaglandin E synthase, von Willebrand factor, and PECAM-1, as well as cell contractility, showed that whereas endothelium-derived cells cultured with fibroblast growth factor can be characterized as endothelial cells, when deprived of fibroblast growth factor, a significant fraction differentiates into smooth muscle-like cells. Reapplication of fibroblast growth factor reversed this differentiation. Activin A was up-regulated in fibroblast growth factor-deprived, endothelium-derived cells; moreover, the inhibitory effects of exogenous follistatin and overexpressed Smad7 on smooth muscle-like differentiation confirmed that the differentiation was driven by activin A signaling. These findings indicate that when deprived of fibroblast growth factor, human umbilical vein endothelium-derived cells are capable of differentiating into smooth muscle-like cells through activin A-induced, Smad-dependent signaling, and that maintenance of the endothelial cell phenotype and differentiation into smooth muscle-like cells are reciprocally controlled by fibroblast growth factor-1 and activin A.