The hypoxia-inducible factor 1 alpha (HIF1α) protein and the hypoxic microenvironment are critical for infection and pathogenesis by the oncogenic gammaherpesviruses (γHV), Kaposi sarcoma herpes virus (KSHV) and Epstein-Barr virus (EBV). However, understanding the role of HIF1α during the virus life cycle and its biological relevance in the context of host has been challenging due to the lack of animal models for human γHV. To study the role of HIF1α, we employed the murine gammaherpesvirus 68 (MHV68), a rodent pathogen that readily infects laboratory mice. We show that MHV68 infection induces HIF1α protein and HIF1α-responsive gene expression in permissive cells. siRNA silencing or drug-inhibition of HIF1α reduce virus production due to a global downregulation of viral gene expression. Most notable was the marked decrease in many viral genes bearing hypoxia-responsive elements (HREs) such as the viral G-Protein Coupled Receptor (vGPCR), which is known to activate HIF1α transcriptional activity during KSHV infection. We found that the promoter of MHV68 ORF74 is responsive to HIF1α and MHV-68 RTA. Moreover, Intranasal infection of HIF1αLoxP/LoxP mice with MHV68 expressing Cre- recombinase impaired virus expansion during early acute infection and affected lytic reactivation in the splenocytes explanted from mice. Low oxygen concentrations accelerated lytic reactivation and enhanced virus production in MHV68 infected splenocytes. Thus, we conclude that HIF1α plays a critical role in promoting virus replication and reactivation from latency by impacting viral gene expression. Our results highlight the importance of the mutual interactions of the oxygen-sensing machinery and gammaherpesviruses in viral replication and pathogenesis.