Hypoxia-inducible factor (HIF) is central in coordinating many of the transcriptional adaptations to hypoxia. Composed of a heterodimer of alpha and beta subunits, the alpha subunit is rapidly degraded in normoxia, leading to inactivation of the hypoxic response. Many models for a molecular oxygen sensor regulating this system have been proposed, but an important finding has been the ability to mimic hypoxia by chelation or substitution of iron. A key insight has been the recognition that HIF-alpha is targeted for degradation by the ubiquitin-proteasome pathway through binding to the von Hippel-Lindau tumour suppressor protein (pVHL), which forms the recognition component of an E3 ubiquitin ligase complex leading to ubiquitylation of HIF-alpha. Importantly, the classical features of regulation by iron and oxygen availability are reflected in regulation of the HIF-alpha/pVHL interaction. It has recently been shown that HIF-alpha undergoes an iron- and oxygen-dependent modification before it can interact with pVHL, and that this results in hydroxylation of at least one prolyl residue (HIF-1alpha, Pro 564). This modification is catalysed by an enzyme termed HIF-prolyl hydroxylase (HIF-PH), and compatible with all previously described prolyl-4-hydroxylases HIF-PH also requires 2-oxoglutarate as a cosubstrate. The key position of this hydroxylation in the degradation pathway of HIF-alpha, together with its requirement for molecular dioxygen as a co-substrate, provides the potential for HIF-PH to function directly as a cellular oxygen sensor. However, the ability of these enzyme(s) to account for the full range of physiological regulation displayed by the HIF system remains to be defined.