Understanding the origin and differentiation mechanism of coronary vascular smooth muscle cells (CoSMCs) is very important to cardiovascular biology. The early cardiovascular system is formed in a hypoxic microenvironment, and Tbx18-positive epicardial cells are a source of CoSMCs. However, the effects of hypoxia on the differentiation of Tbx18-positive epicardial cells to CoSMCs and the primary regulatory mechanism are insufficiently understood. Using Tbx18:Cre/R26R(EYFP/LacZ) fate-tracing mice, we cultured highly purified Tbx18-positive epicardial cells. We further showed that hypoxia induced Tbx18-positive epicardial cells to differentiate into CoSMCs and promoted the epithelial-mesenchymal transition (EMT) process of the cells in vitro. The induction of differentiation was primarily achieved via the hypoxia inducible factor-1α (HIF-1α)-mediated effects exerted on Snail. Using a cell migration assay, we showed that hypoxia enhanced the motility of Tbx18-positive epicardial cells. By constructing a hypoxic model of the embryonic epicardium in vivo, we showed that hypoxia led to premature in situ differentiation of Tbx18-positive epicardial cells to CoSMCs. Furthermore, hypoxia was sufficient to induce Snail expression in Tbx18-positive epicardial cells in vivo. Our study suggests that hypoxia intervention was sufficient to induce the differentiation of Tbx18-positive epicardial cells to CoSMCs. Furthermore, this differentiation was achieved primarily via HIF-1α-mediated regulation of Snail.