Vascular smooth muscle cell (VSMC) proliferation occurs in vascular obstructive events such as atherosclerosis and restenosis. We previously showed that Notch receptors are induced in smooth muscle cells during vascular remodeling. Our goal was to determine the mechanisms employed by Notch signaling to regulate proliferation. Activation of Notch1 and Notch4 induced the VSMC-selective target genes HRT1 and HRT2, promoted cell cycle transit in smooth muscle cells, and led to loss of density-dependent growth inhibition. This was associated with a reduction in levels of the cyclin-dependent kinase inhibitor (cdk) p27(kip1). Over-expression of p27(kip1) resulted in a dose-dependent rescue of the Notch-induced phenotype and exit from the cell cycle. In addition, HRT2 expression was sufficient to promote S-phase entry, and we demonstrate that HRT2 interacts directly with the p27(kip1) promoter to repress transcription. Transcriptional repression occurred within the approximately 774 bp minimal p27(kip1) promoter region and mutational analysis demonstrated that repression is largely dependent on a conserved class-C domain. Our data show that Notch signaling acts to promote a proliferative phenotype in VSMC by modulation of the G1/S-phase checkpoint. In addition, we define a novel mechanism by which the Notch effector, HRT2, interacts directly with the class-C domain of the p27(kip1) promoter, repressing its expression. These studies identify a novel transcriptional target of HRT2, and show that Notch effectors directly control cell cycle regulatory components. We suggest that this mechanism is relevant to hyperproliferative states in VSMC seen during vascular remodeling and repair.