Myocardin is known as an important transcriptional regulator in smooth and cardiac muscle development. Here we found that myocardin is frequently repressed during human malignant transformation, contributing to a differentiation defect. We demonstrate that myocardin is a transcriptional target of TGFβ required for TGFβ-mediated differentiation of human fibroblasts. Serum deprivation, intact contact inhibition response, and the p16ink4a/Rb pathway contribute to myocardin induction and differentiation. Restoration of myocardin expression in sarcoma cells results in differentiation and inhibition of malignant growth, whereas inactivation of myocardin in normal fibroblasts increases their proliferative potential. Myocardin expression is reduced in multiple types of human tumors. Collectively, our results demonstrate that myocardin is an important suppressive modifier of the malignant transformation process.