Adequate response to low oxygen levels (hypoxia) by hypoxia inducible factor (HIF) is essential for normal development and physiology, but this pathway may also contribute to pathological processes like tumor angiogenesis. Here we show that hypoxia is an inducer of Notch signaling. Hypoxic conditions lead to induction of the Notch ligand Dll4 and the Notch target genes Hey1 and Hey2 in various cell lines. Promoter analysis revealed that Hey1, Hey2 and Dll4 are induced by HIF-1alpha and Notch activation. Hypoxia-induced Notch signaling may also determine endothelial identity. Endothelial progenitor cells (EPCs) contain high amounts of COUP-TFII, a regulator of vein identity, while levels of the arterial regulators Dll4 and Hey2 are low. Hypoxia-mediated upregulation of Dll4 and Hey2 leads to repression of COUP-TFII in eEPCs. Finally, we show that Hey factors are capable of repressing HIF-1alpha-induced gene expression, suggesting a negative feedback loop to prevent excessive hypoxic gene induction. Thus, reduced oxygen levels lead to activation of the Dll4-Notch-Hey2 signaling cascade and subsequent repression of COUP-TFII in endothelial progenitor cells. We propose that this is an important step in the developmental regulation of arterial cell fate decision.