Inflammation and angiogenesis are pivotal processes in the progression of many diseases, including malignancies. A hypoxic microenvironment often results in a milieu of proinflammatory and proangiogenic cytokines produced by infiltrating cells. We assessed the role of macrophage-derived hypoxia-associated cytokines in promoting inflammation and angiogenesis. Supernatants of macrophages, stimulated under hypoxia with or without an inflammatory stimulus (LPS), promoted angiogenesis when incorporated into Matrigel plugs. However, neutralization of IL-1 in the supernatants, particularly IL-1beta, completely abrogated cell infiltration and angiogenesis in Matrigel plugs and reduced vascular endothelial growth factor (VEGF) levels by 85%. Similarly, supernatants from macrophages of IL-1beta knockout mice did not induce inflammatory or angiogenic responses. The importance of IL-1 signaling in the host was demonstrated by the dramatic reduction of inflammatory and angiogenic responses in Matrigel plugs that contained macrophage supernatants from control mice which had been implanted in IL-1 receptor type I knockout mice. Myeloid cells infiltrating into Matrigel plugs were of bone marrow origin and represented the major source of IL-1 and other cytokines/chemokines in the plugs. Cells of endothelial lineage were the main source of VEGF and were recruited mainly from neighboring tissues, rather than from the bone marrow. Using the aortic ring sprouting assay, it was shown that in this experimental system, IL-1 does not directly activate endothelial cell migration, proliferation and organization into blood vessel-like structures, but rather activates infiltrating cells to produce endothelial cell activating factors, such as VEGF. Thus, targeting IL-1beta has the potential to inhibit angiogenesis in pathological situations and may be of considerable clinical value.