Hypoxia-inducible factors (HIFs) regulate hematopoiesis in the embryo and maintain hematopoietic stem cell function in the adult. How hypoxia and HIFs contribute to hematopoietic lineage differentiation in the adult is ill defined. Here we provide evidence that HIF-1 limits differentiation of precursors into plasmacytoid dendritic cells (pDCs). Low oxygen up-regulated inhibitor of DNA binding 2 (ID2) and suppressed Flt3-L-induced differentiation of bone marrow cells to pDCs in wild-type but not HIF-1α(fl/fl) LysM-Cre bone marrow cells. Moreover, pDC differentiated normally in hypoxic ID2(-/-) bone marrow cultures. Finally, we observed elevated pDC frequencies in bone marrow, blood, and spleen of HIF-1α(fl/fl) LysM-Cre and ID2(-/-), but not HIF-2α(fl/fl) LysM-Cre mice. Our data indicate that the low oxygen content in the bone marrow might limit pDC development. This might be an environmental mechanism to restrict the numbers of these potentially autoreactive cells.