The transcriptional co-activator YAP1 is the major oncogenic component of the Hippo signaling pathway and contributes to the genesis and progression of various tumors, including non-small cell lung cancer (NSCLC). YAP1 levels are regulated by the canonical Hippo kinases, MST1/2 and LATS1/2, which modulate its cytoplasmic retention and proteasomal degradation. While non-canonical regulation of YAP1 has been reported, its role in hypoxic response is not fully elucidated. The studies presented here show that YAP1 levels and function are modulated by VHL and PHD2. YAP1 could regulate multiple genes involved in angiogenesis through E2F1; it also associates with HIF1α in cancer cells under hypoxic conditions, inducing the VEGF-A promoter. Under normoxic conditions, PHD2 associates with and hydroxylates specific proline residues on YAP1, facilitating its interaction with VHL and promoting ubiquitination and subsequent proteasomal degradation. Exposure to hypoxia dissociates YAP1 from PHD2 and VHL, elevating YAP1 levels and enhancing its association with HIF1α. YAP1-HIF1α interaction was higher in NSCLC and RCC samples, indicating a role for this interaction in the genesis of these cancers. Our results thus reveal a novel mode of regulation of YAP1 by PHD2 and VHL in normoxic cells, suggesting that YAP1-mediated induction of VEGF and other genes contributes to hypoxic response in tumors.