Accumulating data suggest the existence of a link between hypoxia and maintenance of the undifferentiated cell state, but little is known about the cellular signaling mechanisms underlying this process. Recent reports reveal a direct link between components of the hypoxia signaling pathway and Notch pathway in maintaining precursor cells in an undifferentiated state. Here, we report that in the developing mouse pancreas, Hif2-alpha is expressed in pancreatic progenitor cells, but its expression is lost in committed endocrine progenitors as well as in differentiated endocrine and exocrine cells. In an attempt to analyze the function of HIF2-alpha in the developing pancreas, we studied Hif2-alpha(-/-) pancreas. Our analyses revealed that in addition to the decreased size and branching, the Hif2-alpha deficient pancreas also displayed impaired notch signaling and cell differentiation. Finally, we found that HIF2-alpha binds directly to Notch-IC and that the responsible site for this interaction is within the RAM domain of Notch protein. These results suggest that HIF2-alpha is required for normal mouse pancreatic development.