Organisms adapt their metabolism and growth to the availability of nutrients and oxygen, which are essential for development, yet the mechanisms by which this adaptation occurs are not fully understood. Here we describe an RNAi-based body-size screen in Drosophila to identify such mechanisms. Among the strongest hits is the fibroblast growth factor receptor homolog breathless necessary for proper development of the tracheal airway system. Breathless deficiency results in tissue hypoxia, sensed primarily in this context by the fat tissue through HIF-1a prolyl hydroxylase (Hph). The fat relays its hypoxic status through release of one or more HIF-1a-dependent humoral factors that inhibit insulin secretion from the brain, thereby restricting systemic growth. Independently of HIF-1a, Hph is also required for nutrient-dependent Target-of-rapamycin (Tor) activation. Our findings show that the fat tissue acts as the primary sensor of nutrient and oxygen levels, directing adaptation of organismal metabolism and growth to environmental conditions.