Mutations in the human homolog of the Vhlh gene [encoding the von-Hippel Lindau (VHL) protein] lead to tumor development. In mice, depletion of Vhlh in pancreatic ß-cells causes perturbed glucose homeostasis, but the role of this gene in other pancreatic cells is poorly understood. To investigate the function of VHL/HIF pathway in pancreatic cells, we inactivated Vhlh in the pancreatic epithelium as well as in the endocrine and exocrine lineages. Our results show that embryonic depletion of Vhlh within the pancreatic epithelium causes postnatal lethality due to severe hypoglycemia. The hypoglycemia is recapitulated in mice with endocrine-specific removal of Vhlh, while animals with loss of Vhlh predominantly in the exocrine compartment survive to adulthood with no overt defects in glucose metabolism. Mice with hypoglycemia display diminished insulin release in response to elevated glucose. Significantly, the glucagon response is impaired both in vivo (circulating glucagon levels) as well as in an in vitro secretion assay in isolated islets. Hypoxia also impairs glucagon secretion in a glucagon-expressing cell line in culture. Our results reveal a novel role for the hypoxia/HIF pathway in islet hormone secretion and maintenance of the fine balance that allows for the establishment of normoglycemia.