Proliferation of vascular smooth muscle cells (VSMCs) plays an important role in restenosis, a disease characterized by smooth muscle cell hyperplasia and neointimal formation. How proliferation signals are controlled to avoid restenosis is not fully understood. Here we report that TIPE2, the tumor necrosis factor (TNF) α-induced protein 8-like 2 (TNFAIP8L2), suppresses injury-induced restenosis by inhibiting VSMCs proliferation. TIPE2 was significantly upregulated in VSMCs in response to PDGF-BB stimuli and injury. Enforced TIPE2 expression significantly suppressed VSMCs proliferation and cell cycle progression, whereas TIPE2 deficiency in VSMCs promoted cell proliferation and upregulated the expression of Cyclins D1 and D3. TIPE2 likely regulated VSMC proliferation via Rac1-STAT3 and ERK1/2 signaling pathways. It blocked STAT3 activation and nuclear translocation in a Rac1-dependent manner. As a result, TIPE2-deficient VSMCs exhibited enhanced proliferation whereas TIPE2-deficient mice developed more severe restenosis in response to vascular injury. Conversely, adenovirus-mediated gene transfer of TIPE2 significantly reduced injury-induced restenosis in mice. These results indicate that TIPE2 plays a suppressive role in injury-induced restenosis and may serve as a new therapeutic target for treating the disease.