Tumor angiogenesis, the development of new blood vessels, is a highly regulated process that is controlled genetically by alterations in oncogene and tumor suppressor gene expression and physiologically by the tumor microenvironment. Previous studies indicate that the angiogenic switch in Ras-transformed cells may be physiologically promoted by the tumor microenvironment through the induction of the angiogenic mitogen, vascular endothelial growth factor (VEGF). In this report, we show Ras-transformed cells do not use the downstream effectors c-Raf-1 or mitogen activated protein kinases (MAPK) in signaling VEGF induction by hypoxia as overexpression of kinase-defective alleles of these genes does not inhibit VEGF induction under low oxygen conditions. In contrast to the c-Raf-1/MAP kinase pathway, hypoxia increases phosphatidylinositol 3-kinase (PI 3-kinase) activity in a Ras-dependent manner, and inhibition of PI 3-kinase activity genetically and pharmacologically results in inhibition of VEGF induction. We propose that hypoxia modulates VEGF induction in Ras-transformed cells through the activation of a stress inducible PI 3-kinase/Akt pathway and the hypoxia inducible factor-1 (HIF-1) transcriptional response element.