Erythropoietin (Epo) gene transcription is stimulated in Hep3B cells under hypoxic conditions. We have prepared transcriptionally active nuclear extracts from normal and hypoxia-induced Hep3B cells and shown that the hypoxic extracts produce a consistent increase in the level of Epo transcription in vitro, relative to control Hep3B cells. Hypoxic treated HeLa cells failed to express the endogenous Epo gene in vivo, and extracts prepared from them did not show increased Epo transcription in vitro. The Epo transcript which is induced in vitro is initiated at the same site as Epo RNA synthesized in intact Hep3B cells and in human kidney adenocarcinoma cells. This system will facilitate the purification and analysis of factors and sequences required for Epo gene transcription in response to changes in tissue oxygen tension.