Erythropoietin (Epo), the hormone that stimulates red blood cell production, is synthesized in the kidney and liver in response to hypoxia. The human hepatoma cell line Hep3B regulates its production of Epo in a physiologic manner. Either hypoxia or cobalt chloride markedly increases expression of Epo mRNA as well as production of biologically active and immunologically distinct Epo protein. New protein synthesis is required before the induction of increased levels of hypoxia- or cobalt-induced Epo mRNA. Hypoxia, cobalt chloride, and nickel chloride appear to stimulate Epo production through a common pathway. The inhibition of Epo production at low partial pressures of oxygen by carbon monoxide provides evidence that a heme protein is integrally involved in the oxygen-sensing mechanism. This hypothesis is further supported by the finding that when heme synthesis is blocked, hypoxia-, cobalt-, and nickel-induced Epo production are all markedly inhibited. A model is proposed in which a ligand-dependent conformational change in a heme protein accounts for the mechanism by which hypoxia as well as cobalt and nickel stimulate the production of Epo.