Previous studies investigating the role of smooth muscle cells (SMCs) and macrophages in the pathogenesis of atherosclerosis have provided controversial results owing to the use of unreliable methods for clearly identifying each of these cell types. Here, using Myh11-CreERT2 ROSA floxed STOP eYFP Apoe-/- mice to perform SMC lineage tracing, we find that traditional methods for detecting SMCs based on immunostaining for SMC markers fail to detect >80% of SMC-derived cells within advanced atherosclerotic lesions. These unidentified SMC-derived cells exhibit phenotypes of other cell lineages, including macrophages and mesenchymal stem cells (MSCs). SMC-specific conditional knockout of Krüppel-like factor 4 (Klf4) resulted in reduced numbers of SMC-derived MSC- and macrophage-like cells, a marked reduction in lesion size, and increases in multiple indices of plaque stability, including an increase in fibrous cap thickness as compared to wild-type controls. On the basis of in vivo KLF4 chromatin immunoprecipitation-sequencing (ChIP-seq) analyses and studies of cholesterol-treated cultured SMCs, we identified >800 KLF4 target genes, including many that regulate pro-inflammatory responses of SMCs. Our findings indicate that the contribution of SMCs to atherosclerotic plaques has been greatly underestimated, and that KLF4-dependent transitions in SMC phenotype are critical in lesion pathogenesis.