Phenotypic modulation of vascular smooth muscle cells (VSMCs) plays a critical role in the pathogenesis of a variety of proliferative vascular diseases. Recently, we have found that microRNA (miRNA) miR-145 is the most abundant miRNA in normal vascular walls and in freshly isolated VSMCs; however, the role of miR-145 in VSMC phenotypic modulation and vascular diseases is currently unknown. Here we find that miR-145 is selectively expressed in VSMCs of the vascular wall and its expression is significantly downregulated in the vascular walls with neointimal lesion formation and in cultured dedifferentiated VSMCs. More importantly, both in cultured rat VSMCs in vitro and in balloon-injured rat carotid arteries in vivo, we demonstrate that the noncoding RNA miR-145 is a novel phenotypic marker and a novel phenotypic modulator of VSMCs. VSMC differentiation marker genes such as SM alpha-actin, calponin, and SM-MHC are upregulated by premiR-145 or adenovirus expressing miR-145 (Ad-miR-145) but are downregulated by the miR-145 inhibitor 2'OMe-miR-145. We have further identified that miR-145-mediated phenotypic modulation of VSMCs is through its target gene KLF5 and its downstream signaling molecule, myocardin. Finally, restoration of miR-145 in balloon-injured arteries via Ad-miR-145 inhibits neointimal growth. We conclude that miR-145 is a novel VSMC phenotypic marker and modulator that is able of controlling vascular neointimal lesion formation. These novel findings may have extensive implications for the diagnosis and therapy of a variety of proliferative vascular diseases.