It has been proposed that cells sense hypoxia by a heme protein, which transmits a signal that activates the heterodimeric transcription factor hypoxia-inducible factor 1 (HIF-1), thereby inducing a number of physiologically relevant genes such as erythropoietin (Epo). We have investigated the mechanism by which two heme-binding ligands, carbon monoxide and nitric oxide, affect oxygen sensing and signaling. Two concentrations of CO (10 and 80%) suppressed the activation of HIF-1 and induction of Epo mRNA by hypoxia in a dose-dependent manner. In contrast, CO had no effect on the induction of HIF-1 activity and Epo expression by either cobalt chloride or the iron chelator desferrioxamine. The affinity of CO for the putative sensor was much lower than that of oxygen (Haldane coefficient, approximately 0.5). Parallel experiments were done with 100 microM sodium nitroprusside, a nitric oxide donor. Both NO and CO inhibited HIF-1 DNA binding by abrogating hypoxia-induced accumulation of HIF-1alpha protein. Moreover, both NO and CO specifically targeted the internal oxygen-dependent degradation domain of HIF-1alpha, and also repressed the C-terminal transactivation domain of HIF-1alpha. Thus, NO and CO act proximally, presumably as heme ligands binding to the oxygen sensor, whereas desferrioxamine and perhaps cobalt appear to act at a site downstream.