Hypoxia-inducible factors (HIFs) are crucial for oxygen homeostasis during both embryonic development and postnatal life. Here we show that a novel HIF family basic helix-loop-helix (bHLH) PAS (Per-Arnt-Sim) protein, which is expressed predominantly during embryonic and neonatal stages and thereby designated NEPAS (neonatal and embryonic PAS), acts as a negative regulator of HIF-mediated gene expression. NEPAS mRNA is derived from the HIF-3␣ gene by alternative splicing, replacing the first exon of HIF-3␣ with that of inhibitory PAS. NEPAS can dimerize with Arnt and exhibits only low levels of transcriptional activity, similar to that of HIF-3␣. NEPAS suppressed reporter gene expression driven by HIF-1␣ and HIF-2␣. By generating mice with a targeted disruption of the NEPAS/HIF-3␣ locus, we found that homozygous mutant mice (NEPAS/ HIF-3␣ ؊/؊ ) were viable but displayed enlargement of the right ventricle and impaired lung remodeling. The expression of endothelin 1 and platelet-derived growth factor  was increased in the lung endothelial cells of NEPAS/HIF-3␣-null mice. These results demonstrate a novel regulatory mechanism in which the activities of HIF-1␣ and HIF-2␣ are negatively regulated by NEPAS in endothelial cells, which is pertinent to lung and heart development during the embryonic and neonatal stages.Hypoxia-inducible factors (HIFs) are crucial for oxygen homeostasis during both embryonic development and postnatal life. HIFs are heterodimeric transcription factors consisting of ␣ and  subunits. To date, three ␣ subunits (HIF-1␣, HIF-2␣, and HIF-3␣) and one  subunit (HIF-1, also called Arnt [aryl hydrocarbon receptor nuclear translocator]) have been identified (10, 34, 37). Oxygen-dependent activity of HIFs is mainly regulated through the stability of their ␣ subunits. Under the normoxic condition, HIF-␣ protein is rapidly degraded through the ubiquitin-proteasomal pathway. During this process, HIF-␣ is hydroxylated by proline hydroxylases and specifically interacts with the von Hippel-Lindau (VHL) tumor suppressor protein (8, 21), which acts as a component of E3 ubiquitin ligase and targets HIF-␣ molecules for ubiquitination and subsequent degradation (12). Under low oxygen tension, hydroxylation of HIF-␣ is significantly reduced because the activity of proline hydroxylases is repressed by hypoxia. Since VHL can recognize exclusively the hydroxylated HIF-␣ molecules, in the hypoxic condition HIF-␣ is stabilized and activates transcription of target genes with Arnt in the nucleus.Although it is indisputable that this ubiquitin-proteasomal pathway plays a central role in determining HIF activity, an additional regulatory mechanism should be considered under certain conditions. For instance, the availability of oxygen is limited in utero and embryos are continuously exposed to hypoxia (17). Under such conditions, it is likely that HIF-␣ proteins are no longer degraded and accumulate into the nucleus. Given the fact that both HIF-1␣ and HIF-2␣ are required for early embryonic development (13,25,33), HIF...