Objectives: Tissue engineered vascular grafts with long-term patency are in great need in the clinics, for which smooth muscle cells (SMCs) are essential. Recently several laboratories have established methods to obtain SMCs from embryonic stem cells or iPS cells. However, the mechanisms of stem cell differentiation are not fully understood. And also it is hard to obtain a large number of SMCs with higher purity. To solve these issues, we take the advantage of mesenchymal stem cells (MSCs) from human umbilical cord that were cultivated and differentiated in vitro. Methods: MSCs from human umbilical cord were cultivated and differentiated to vascular lineages. Signal pathways involved in stem cell differentiation were studied using Western blot, siRNA, PCR, immunoprecipation and transfection. For vascular tissue engineering, stem cell-derived SMCs were applied to decelularized scaffold to create the vessels in a Bioreactor. Results: In response to TGFβ1 stimulation, MSCs were abundantly expressing SMC markers including αSMA, SM22, calponin and SMMHC at the gene and protein levels. Functionally, differentiated SMCs displayed a contraction ability in vitro and formed vessels in matrigel plug assay SCID mice. Micro-RNA (miR) array analysis showed the upregulation of miR-503 and the downregulation of miR-222-5p at early time points after TGFβ1 treatment, which was confirmed by TaqMan microRNA assay. Mechanistically, miR-503 was demonstrated to promote SMC differentiation through directly targeting Smad7, a negative regulator of TGFβ1 Smad-related signaling pathways. The expression of miR-503 was Smad4-dependent and Smad4 was enriched at the promoter region of miR-503. In addition, miR-222-5p inhibited SMC differentiation through targeting ROCK2 and αSMA 3’-UTR. Finally, SMCs differentiated from stem cells exhibited the ability to migrate into decellularized mouse aorta and gave rise to vascular graft with smooth muscle layer. Conclusions: We established a method to produce a large number of human SMCs from MSCs, which demonstrated the potential of utilizing the cells to generate vascular grafts. And we provide the mechanistic data demonstrating the impact of miRNA-503/222-5p on TGFβ1-mediated signaling in SMC differentiation from stem cells.