The transcriptional response to lowered oxygen levels is mediated by the hypoxia-inducible transcription factor (HIF-1), a heterodimer consisting of the constitutively expressed aryl hydrocarbon receptor nuclear translocator (ARNT) and the hypoxic response factor HIF-1alpha. To study the role of the transcriptional hypoxic response in vivo we have targeted the murine HIF-1alpha gene. Loss of HIF-1alpha in embryonic stem (ES) cells dramatically retards solid tumor growth; this is correlated with a reduced capacity to release the angiogenic factor vascular endothelial growth factor (VEGF) during hypoxia. HIF-1alpha null mutant embryos exhibit clear morphological differences by embryonic day (E) 8.0, and by E8.5 there is a complete lack of cephalic vascularization, a reduction in the number of somites, abnormal neural fold formation and a greatly increased degree of hypoxia (measured by the nitroimidazole EF5). These data demonstrate the essential role of HIF-1alpha in controlling both embryonic and tumorigenic responses to variations in microenvironmental oxygenation.