Hypoxia inducible factor-1 (HIF-1) initiates key cellular and tissue responses to physiological and pathological hypoxia. Evidence from in vitro and structural analyses supports a critical role for Cited2 in down-regulating HIF-1-mediated transcription by competing for binding with oxygen-sensitive HIF-1alpha to transcriptional co-activators CBP/p300. We previously detected elevated expression of HIF-1 target genes in Cited2(-/-) embryonic hearts, indicating that Cited2 inhibits HIF-1 transactivation in vivo. In this study, we show for the first time that highly hypoxic cardiac regions in mouse embryos corresponded to the sites of defects in Cited2(-/-) embryos and that defects of the outflow tract, interventricular septum, cardiac vasculature, and hyposplenia were largely rescued by HIF-1alpha haploinsufficiency. The hypoxia of the outflow tract and interventricular septum peaked at E13.5 and dissipated by E15.5 in wild-type hearts, but persisted in E15.5 Cited2(-/-) hearts. The persistent hypoxia and abnormal vasculature in the myocardium of interventricular septum in E15.5 Cited2(-/-) hearts were rescued with decreased HIF-1alpha gene dosage. Accordingly, mRNA levels of HIF-1-responsive genes were reduced in Cited2(-/-) embryonic hearts by HIF-1alpha heterozygosity. These findings suggest that a precise level of HIF-1 transcriptional activity critical for normal development is triggered by differential hypoxia and regulated through feedback inhibition by Cited2.