Oxygen is an indispensable element for cell survival and maintenance. Eukaryotic cells are equipped with a series of signaling pathways that cope with hypoxia. The dioxygenase factor inhibiting HIF (FIH) is an oxygen sensor that regulates the transcriptional activity of hypoxia-inducible factor (HIF) through asparaginyl hydroxylation. Given that HACE1 was detected as an FIH-interacting protein in a previous proteomics study, we tested whether the E3 ubiquitin ligase HACE1 is a substrate for FIH. FIH interacted with HACE1, in cells and in vitro, and was determined to hydroxylate HACE1 at the N191 residue within the ankyrin repeat domain. Hydroxylation disrupted the physical association between HACE1 and its representative target, Rac1. Under hypoxic conditions, HACE1 is less hydroxylated due to the inactivation of FIH, and subsequently functions to ubiquitinate the active form of Rac1, leading to the proteasomal degradation of Rac1. Since Rac1 stimulates cell movement, HACE1 inhibits cell migration and invasion in breast cancer by removing active Rac1. Such an effect of HACE1 is reinforced under hypoxia because HACE1 escapes from FIH-mediated hydroxylation. In clinical datasets, HACE1 downregulation is associated with poor outcomes in patients with breast cancer. Taken together, FIH is likely to act as an oxygen sensor that determines oxygen-dependent cancer progression.