Hypoxia activates a number of gene products through degradation of the transcriptional coactivator cAMP response element binding protein (CREB). Other transcriptional regulators (e.g., beta-catenin and NF-kappa B) are controlled through phosphorylation-targeted proteasomal degradation, and thus, we hypothesized a similar degradative pathway for CREB. Differential display analysis of mRNA derived from hypoxic epithelia revealed a specific and time-dependent repression of protein phosphatase 1 (PP1), a serine phosphatase important in CREB dephosphorylation. Subsequent studies identified a previously unappreciated proteasomal-targeting motif within the primary structure of CREB (DSVTDS), which functions as a substrate for PP1. Ambient hypoxia resulted in temporally sequential CREB serine phosphorylation, ubiquitination, and degradation (in vitro and in vivo). HIV-tat peptide-facilitated loading of intact epithelia with phosphopeptides corresponding to this proteasome targeting motif resulted in inhibition of CREB ubiquitination. Further studies revealed that PP1 inhibitors mimicked hypoxia-induced gene expression, whereas proteasome inhibitors reversed the hypoxic phenotype. Thus, hypoxia establishes conditions that target CREB to proteasomal degradation. These studies may provide unique insight into a general mechanism of transcriptional regulation by hypoxia.