Smooth muscle cells (SMCs) modulate their phenotype between proliferative and differentiated states in response to physiological and pathological cues. Insulin-like growth factor-I stimulates differentiation of SMCs by activating phosphoinositide-3-kinase (PI3K)-Akt signaling. Foxo forkhead transcription factors act as downstream targets of Akt and are inactivated through phosphorylation by Akt. We show that Foxo4 represses SMC differentiation by interacting with and inhibiting the activity of myocardin, a transcriptional coactivator of smooth muscle genes. PI3K/Akt signaling promotes SMC differentiation, at least in part, by stimulating nuclear export of Foxo4, thereby releasing myocardin from its inhibitory influence. Accordingly, reduction of Foxo4 expression in SMCs by siRNA enhances myocardin activity and SMC differentiation. We conclude that signal-dependent interaction of Foxo4 with myocardin couples extracellular signals with the transcriptional program for SMC differentiation.