The trafficking of circulating stem and progenitor cells to areas of tissue damage is poorly understood. The chemokine stromal cell-derived factor-1 (SDF-1 or CXCL12) mediates homing of stem cells to bone marrow by binding to CXCR4 on circulating cells. SDF-1 and CXCR4 are expressed in complementary patterns during embryonic organogenesis and guide primordial stem cells to sites of rapid vascular expansion. However, the regulation of SDF-1 and its physiological role in peripheral tissue repair remain incompletely understood. Here we show that SDF-1 gene expression is regulated by the transcription factor hypoxia-inducible factor-1 (HIF-1) in endothelial cells, resulting in selective in vivo expression of SDF-1 in ischemic tissue in direct proportion to reduced oxygen tension. HIF-1-induced SDF-1 expression increases the adhesion, migration and homing of circulating CXCR4-positive progenitor cells to ischemic tissue. Blockade of SDF-1 in ischemic tissue or CXCR4 on circulating cells prevents progenitor cell recruitment to sites of injury. Discrete regions of hypoxia in the bone marrow compartment also show increased SDF-1 expression and progenitor cell tropism. These data show that the recruitment of CXCR4-positive progenitor cells to regenerating tissues is mediated by hypoxic gradients via HIF-1-induced expression of SDF-1.