Rationale: Phenotypic modulation of smooth muscle cells (SMCs), which are located in close proximity to endothelial cells (ECs), is critical in regulating vascular function. The role of flow-induced shear stress in the modulation of SMC phenotype has not been well defined. Objective: The objective was to elucidate the role of shear stress on ECs in modulating SMC phenotype and its underlying mechanism. Methods and Results: Application of shear stress (12 dyn/cm) to ECs cocultured with SMCs modulated SMC phenotype from synthetic to contractile state, with upregulation of contractile markers, downregulation of proinflammatory genes, and decreased percentage of cells in the synthetic phase. Treating SMCs with media from sheared ECs induced peroxisome proliferator-activated receptor (PPAR)-α, -δ, and -γ ligand binding activities; transfecting SMCs with specific small interfering (si)RNAs of PPAR-α and -δ, but not -γ, inhibited shear induction of contractile markers. ECs exposed to shear stress released prostacyclin (PGI). Transfecting ECs with PGI synthase-specific siRNA inhibited shear-induced activation of PPAR-α/δ, upregulation of contractile markers, downregulation of proinflammatory genes, and decrease in percentage of SMCs in synthetic phase. Mice with PPAR-α deficiency (compared with control littermates) showed altered SMC phenotype oward a synthetic state, with increased arterial contractility in response to angiotensin II. Conclusions: These results indicate that laminar shear stress induces synthetic-to-contractile phenotypic modulation in SMCs through the activation of PPAR-α/δ by the EC-released PGI2. Our findings provide insights into the mechanisms underlying the EC-SMC interplays and the protective homeostatic function of laminar shear stress in modulating SMC phenotype. © 2009 American Heart Association, Inc.