gax, a diverged homeobox gene expressed in vascular smooth muscle cells (VSMCs), is down-regulated in vitro by mitogen stimulation and in vivo in response to vascular injury that leads to cellular proliferation. Recombinant Gax protein microinjected into VSMCs and fibroblasts inhibited the mitogen-induced entry into S-phase when introduced either during quiescence or early stages of G1. Overexpression of gax with a replication-defective adenovirus vector resulted in G0/G1 cell cycle arrest of VSMCs and fibroblasts. The gax-induced growth inhibition correlated with a p53-independent up-regulation of the cyclin-dependent kinase inhibitor p21. Gax overexpression also led to an association of p21 with cdk2 complexes and a decrease in cdk2 activity. Fibroblasts deficient in p21 were not susceptible to a reduction in cdk2 activity or growth inhibition by gax overexpression. Localized delivery of the virus to denuded rat carotid arteries significantly reduced neointima formation and luminal narrowing. These data indicate that gax overexpression can inhibit cell proliferation in a p21-dependent manner and can modulate injury-induced changes in vessel wall morphology that result from excessive cellular proliferation.