Abstract Aims The major cardiac cell types composing the adult heart arise from common multipotent precursor cells. Cardiac lineage decisions are guided by extrinsic and cell-autonomous factors, including recently discovered long noncoding RNAs (lncRNAs). The human lncRNA CARMEN, which is known to dictate specification toward the cardiomyocyte (CM) and the smooth muscle cell (SMC) fates, generates a diversity of alternatively spliced isoforms. Methods and results The CARMEN locus can be manipulated to direct human primary cardiac precursor cells (CPCs) into specific cardiovascular fates. Investigating CARMEN isoform usage in differentiating CPCs represents therefore a unique opportunity to uncover isoform-specific functions in lncRNAs. Here, we identify one CARMEN isoform, CARMEN-201, to be crucial for SMC commitment. CARMEN-201 activity is encoded within an alternatively spliced exon containing a MIRc short interspersed nuclear element. This element binds the transcriptional repressor REST (RE1 Silencing Transcription Factor), targets it to cardiogenic loci, including ISL1, IRX1, IRX5, and SFRP1, and thereby blocks the CM gene program. In turn, genes regulating SMC differentiation are induced. Conclusions These data show how a critical physiological switch is wired by alternative splicing and functional transposable elements in a long noncoding RNA. They further demonstrated the crucial importance of the lncRNA isoform CARMEN-201 in SMC specification during heart development.