Regulation of gene expression plays an integral role in adaptation of cells to hypoxic stress. In mammals, prolyl hydroxylases control levels of the central transcription factor hypoxia inducible factor (HIF) through regulation of HIFα subunit stability. Here, we report that the hydroxylase Ofd1 regulates the Sre1 hypoxic transcription factor in fission yeast by controlling DNA binding. Prolyl hydroxylases require oxygen as a substrate, and the activity of Ofd1 regulates Sre1-dependent transcription. In the presence of oxygen, Ofd1 binds the Sre1 N-terminal transcription factor domain (Sre1N) and inhibits Sre1-dependent transcription by blocking DNA binding. In the absence of oxygen, the inhibitor Nro1 binds Ofd1, thereby releasing Sre1N and leading to activation of genes required for hypoxic growth. In contrast to the HIF system, where proline hydroxylation is essential for regulation, Ofd1 inhibition of Sre1N does not require hydroxylation and, thus, defines a new mechanism for hypoxic gene regulation.