SUMOylation is a dynamic process, catalyzed by SUMO-specific ligases and reversed by Sentrin/SUMO-specific proteases (SENPs). The physiologic consequences of SUMOylation and deSUMOylation are not fully understood. Here we investigate the phenotypes of mice lacking SENP1 and find that SENP1(-/-) embryos show severe fetal anemia stemming from deficient erythropoietin (Epo) production and die midgestation. We determine that SENP1 controls Epo production by regulating the stability of hypoxia-inducible factor 1alpha (HIF1alpha) during hypoxia. Hypoxia induces SUMOylation of HIF1alpha, which promotes its binding to a ubiquitin ligase, von Hippel-Lindau (VHL) protein, through a proline hydroxylation-independent mechanism, leading to its ubiquitination and degradation. In SENP1(-/-) MEFs, hypoxia-induced transcription of HIF1alpha-dependent genes such as vascular endothelial growth factor (VEGF) and glucose transporter 1 (Glut-1) is markedly reduced. These results show that SENP1 plays a key role in the regulation of the hypoxic response through regulation of HIF1alpha stability and that SUMOylation can serve as a direct signal for ubiquitin-dependent degradation.