Many cells identified as macrophage-like in human and mouse atherosclerotic plaques are thought to be of vascular smooth muscle cell (VSMC) origin. We identified cholesterol-mediated down-regulation of TGFβ signaling in vitro in human (h)VSMCs by localization of TGFβ receptors in membrane lipid rafts, which was reversed by high-density lipoprotein (HDL)-mediated cholesterol efflux. This restored VSMC contractile marker (Acta2) and suppressed macrophage marker (CD68) expression by promoting TGFβ enhancement of Mir145 expression. In vivo, administration of ApoA1 (which forms HDL) to atherosclerotic mice also promoted VSMC Acta2 expression and reduced CD68 expression. Because macrophage-like VSMCs are thought to have adverse properties, our studies not only show mechanistically how cholesterol causes their transition, but also suggest that efflux-competent HDL particles may have a therapeutic role by restoring a more favorable phenotypic state of VSMCs in atherosclerotic plaques.