Hypoxia-inducible factor-1alpha (HIF-1α) expression promotes angiogenesis and can influence stem cell engraftment. We investigated the effect of stable over-expression of constitutively active HIF-1α on cardiosphere-derived cell (CDC) engraftment and left ventricular function. CDCs were transduced with a lentivirus expressing a constitutively active mutant of human HIF-1α (LVHIF-1α). Two million male rat CDCs were injected into the infarct following ligation of the mid-LAD in female syngeneic rats. Left ventricular ejection fraction (EF) and circumferential strain were measured by echocardiography at 1 and 4 weeks post-MI in the following groups: PBS group (n = 7), CELL group (n = 7), and CELL-HIF group (n = 7). HIF-1α, VEGF, endothelin-1 expression, and CDC engraftment were measured by quantitative PCR. At 30 days, EF was unchanged in the CELL-HIF group (p = NS), increased in the CELL group (p = 0.025), and decreased in the PBS group (p = 0.021), but engraftment was similar (2.4% ± 3.3% vs 1.7% ± 0.8%, p = NS). Mean circumferential strain of the infarcted region was unchanged in the CELL-HIF group, but improved in the CELL group (p = 0.02). Endothelin-1 and VEGF expression were higher in HIF-CDCs exposed to hypoxia, compared with non-transduced CDCs. HIF-1α expression in CDCs blunted the beneficial functional effects of CDC transplantation, suggesting that paracrine factor balance may play an important role in cardiac regeneration.