Although it was known for a long time that oxygen deprivation leads to the transcriptional induction of the gene encoding erythropoietin, the molecular mechanisms behind this process remained enigmatic. The cloning of the hypoxia‐inducible factors (HIFs), the finding that HIF‐1 regulates the expression of many more genes apart from erythropoietin, and the elucidation of the oxygen‐dependent mechanisms degrading the HIF a subunits recently led to the spectacular discovery of the molecular principles of oxygen sensing. This review aims to summarize our current knowledge of oxygen‐regulated gene expression.—Wenger, R. H. Cellular adaptation to hypoxia: O₂‐sensing protein hydroxylases, hypoxia‐inducible transcription factors, and O₂‐regulated gene expression. FASEB J. 16, 1151–1162 (2002)