Adaptation to hypoxia is a critical cellular event both in pathological settings, such as cancer and ischaemia, and in normal development and differentiation. Oxygen is thought to be not only an indispensable metabolic substrate for a variety of in vivo enzymatic reactions, including mitochondrial respiration, but also a key regulatory signal in tissue development and homeostasis by controlling a specific genetic program. Hypoxia-inducible transcription factors (HIFs) HIF-1 and HIF-2 are central mediators of the homeostatic response that enables cells to survive and differentiate in low-oxygen conditions. Genetically altered mice have been used to identify important roles for HIF-1 and HIF-2 as well as vascular endothelial growth factor (VEGF)—a potent angiogenic factor and a downstream target of the HIF pathway—in the regulation of skeletal development, bone homeostasis and haematopoiesis. In this Review, we summarize the current knowledge of HIF signalling in cartilage, bone and blood, and pay particular attention to the complex relationship between HIF and VEGF in these tissues revealed by data from research using animal models. The study of these models expands our understanding of the cell autonomous, paracrine and autocrine effects that mediate the homeostatic responses downstream of HIFs and VEGF.