Since chronic inflammation is associated with the pathogenesis of atherosclerosis, inflammatory cytokines might contribute to the phenotypic modulation of vascular smooth muscle cells (VSMCs). Tumor necrosis factor α (TNFα) facilitated the transformation of contractile VSMCs to the synthetic phenotype, as determined by the expression of marker proteins and a collagen gel contraction assay. Western blot analysis and a cyclooxygenase-2 (COX2) promoter assay revealed that TNFα stimulation resulted in the induction of COX2. The overexpression, silencing, or pharmacological inhibition of COX2 significantly affected TNFα-induced phenotypic conversion, and of the tested prostaglandins, only PGD2 significantly induced phenotypic conversion. ERK was significantly activated by PGD2 stimulation, and the pharmacological inhibition of ERK blocked the PGD2-induced phenotypic conversion of VSMCs. However, antagonists or agonists of PGD2 receptors did not affect VSMC conversion. In contrast, spontaneously dehydrated forms of PGD2, such as PGJ2, Δ12-PGJ2, and 15-d-PGJ2, strongly induced phenotypic conversion. A reporter gene assay showed that TNFα, PGD2, and 15-d-PGJ2 significantly activated the peroxisome proliferator-responsive element (PPRE) promoter. In addition, the overexpression or silencing of peroxisome proliferator-activated receptor δ (PPARδ) significantly influenced 15-d-PGJ2-induced phenotypic conversion. Finally, atherosclerotic neointima formation was significantly suppressed in mice lacking TNFα. In addition, mice fed celecoxib exhibited complete inhibition of carotid artery ligation-induced neointima formation. This study shows that PGD2 regulates the phenotypic conversion of VSMCs by generating an endogenous ligand of PPAR, and that this leads to neointima formation in occlusive arterial disease.