Nonsense-mediated RNA decay (NMD) rapidly degrades both mutated mRNAs and nonmutated cellular mRNAs in what is thought to be a constitutive fashion. Here we demonstrate that NMD is inhibited in hypoxic cells and that this inhibition is dependent on phosphorylation of the α subunit of eukaryotic initiation factor 2 (eIF2α). eIF2α phosphorylation is known to promote translational and transcriptional up-regulation of genes important for the cellular response to stress. We show that the mRNAs of several of these stress-induced genes are NMD targets and that the repression of NMD stabilizes these mRNAs, thus demonstrating that the inhibition of NMD augments the cellular stress response. Furthermore, hypoxia-induced formation of cytoplasmic stress granules is also dependent on eIF2α phosphorylation, and components of the NMD pathway are relocalized to these granules in hypoxic cells, providing a potential mechanism for the hypoxic inhibition of NMD. Our demonstration that NMD is inhibited in hypoxic cells reveals that the regulation of NMD can dynamically alter gene expression and also establishes a novel mechanism for hypoxic gene regulation.