Hypoxia is an important condition in the tumor cell microenvironment and approximately 1% to 1.5% of the genome is transcriptionally responsive to hypoxia with hypoxia-inducible factor-1 (HIF-1) as a major mediator of transcriptional activation. Tumor hypoxia is associated with a more aggressive phenotype of many cancers in adults, but data on pediatric tumors are scarce. Because, by immunohistochemistry, HIF-1alpha expression was readily detectable in 18 of 28 primary Ewing's sarcoma family tumors (ESFT), a group of highly malignant bone-associated tumors in children and young adults, we studied the effect of hypoxia on ESFT cell lines in vitro. Intriguingly, we found that EWS-FLI1 protein expression, which characterizes ESFT, is upregulated by hypoxia in a HIF-1alpha-dependent manner. Hypoxia modulated the EWS-FLI1 transcriptional signature relative to normoxic conditions. Both synergistic as well as antagonistic transcriptional effects of EWS-FLI1 and of hypoxia were observed. Consistent with alterations in the expression of metastasis-related genes, hypoxia stimulated the invasiveness and soft agar colony formation of ESFT cells in vitro. Our data represent the first transcriptome analysis of hypoxic ESFT cells and identify hypoxia as an important microenvironmental factor modulating EWS-FLI1 expression and target gene activity with far-reaching consequences for the malignant properties of ESFT.