Magicin, a protein that we isolated earlier as an interactor of the neurofibromatosis 2 protein merlin, was independently identified as MED28, a subunit of the mammalian Mediator complex. Mediator complex is an evolutionarily conserved transcriptional cofactor, which plays an essential role in positive and negative gene regulation. Distinct Mediator subunit composition is thought to contribute to gene regulation specificity based on the interaction of specific subunits with subsets of transcription factors. Here we report that down-regulation of Med28 expression in NIH3T3 cells results in a significant induction of several genes associated with smooth muscle cell (SMC) differentiation. Conversely, overexpression of MED28 represses expression of SMC genes, in concordance with our knockdown data. More importantly, multipotent mesenchymal-derived murine precursors can transdifferentiate into SMCs when Med28 is down-regulated. Our data also show that Med28 functions as a negative regulator of SMC differentiation in concert with other Mediator subunits including Med6, Med8, and Med18 within the Mediator head module. Our results provide strong evidence that MED28 may function as a scaffolding protein by maintaining the stability of a submodule within the head module and that components of this submodule act together in a gene regulatory program to suppress SMC differentiation. The results presented here demonstrate for the first time that the mammalian Mediator subunit MED28 functions as a repressor of SMC differentiation, which could have implications for disorders associated with abnormalities in SMC growth and differentiation, including atherosclerosis, asthma, hypertension, and smooth muscle tumors.