The hypoxia-inducible transcription factor-1 (HIF-1) is central to a number of pathological processes through the induction of specific genes such as vascular endothelial growth factor (VEGF). Even though HIF-1 is highly regulated by cellular oxygen levels, other elements of the inflammatory and tumor microenvironment were shown to influence its activity under normal oxygen concentration. Among others, recent studies indicated that transforming growth factor (TGF) ␤ increases the expression of the regulatory HIF-1␣ subunit, and induces HIF-1 DNA binding activity. Here, we demonstrate that TGF␤ acts on HIF-1␣ accumulation and activity by increasing HIF-1␣ protein stability. In particular, we demonstrate that TGF␤ markedly and specifically decreases both mRNA and protein levels of a HIF-1␣-associated prolyl hydroxylase (PHD), PHD2, through the Smad signaling pathway. As a consequence, the degradation of HIF-1␣ was inhibited as determined by impaired degradation of a reporter protein containing the HIF-1␣ oxygen-dependent degradation domain encompassing the PHD-targeted prolines. Moreover, inhibition of the TGF␤1 converting enzyme, furin, resulted in increased PHD2 expression, and decreased basal HIF-1␣ and VEGF levels, suggesting that endogenous production of bioactive TGF␤1 efficiently regulates HIF-1-targeted genes. This was reinforced by results from HIF-1␣ knock-out or HIF-1␣-inhibited cells that show impairment in VEGF production in response to TGF␤. This study reveals a novel mechanism by which a growth factor controls HIF-1 stability, and thereby drives the expression of specific genes, through the regulation of PHD2 levels.