Molecular oxygen is essential for the development, growth and survival of multicellular organisms. Hypoxic microenvironments and oxygen gradients are generated physiologically during embryogenesis and organogenesis. In the eye, oxygen plays a crucial role in both physiological vascular development and common blinding diseases. The retinal pigment epithelium (RPE) is a monolayer of cells essential for normal ocular development and in the mature retina provides support for overlying photoreceptors and their vascular supply. Hypoxia at the level of the RPE is closely implicated in pathogenesis of age-related macular degeneration. Adaptive tissue responses to hypoxia are orchestrated by sophisticated oxygen sensing mechanisms. In particular, the von Hippel-Lindau tumour suppressor protein (pVhl) controls hypoxia-inducible transcription factor (HIF)-mediated adaptation. However, the role of Vhl/Hif1a in the RPE in the development of the eye and its vasculature is unknown. In this study we explored the function of Vhl and Hif1a in the developing RPE using a tissue-specific conditional-knockout approach. We found that deletion of Vhl in the RPE results in RPE apoptosis, aniridia and microphthalmia. Increased levels of Hif1a, Hif2a, Epo and Vegf are associated with a highly disorganised retinal vasculature, chorioretinal anastomoses and the persistence of embryonic vascular structures into adulthood. Additional inactivation of Hif1a in the RPE rescues the RPE morphology, aniridia, microphthalmia and anterior vasoproliferation, but does not rescue retinal vasoproliferation. These data demonstrate that Vhl-dependent regulation of Hif1a in the RPE is essential for normal RPE and iris development, ocular growth and vascular development in the anterior chamber, whereas Vhl-dependent regulation of other downstream pathways is crucial for normal development and maintenance of the retinal vasculature.