The ability to adapt to acute and chronic hypoxia is critical for cellular survival. Two established functional responses to hypoxia include the regulation of gene transcription by HIF (hypoxia-inducible factor), and the constriction of pulmonary arteries in response to alveolar hypoxia. The mechanism of O2 sensing in these responses is not established, but some studies implicate hypoxia-induced mitochondrial ROS (reactive oxygen species) signalling. To further test this hypothesis, we expressed PRDX5 (peroxiredoxin-5), a H2O2 scavenger, in the IMS (mitochondrial intermembrane space), reasoning that the scavenging of ROS in that compartment should abrogate cellular responses triggered by the release of mitochondrial oxidants to the cytosol. Using adenoviral expression of IMS-PRDX5 (IMS-targeted PRDX5) in PASMCs (pulmonary artery smooth muscle cells) we show that IMS-PRDX5 inhibits hypoxia-induced oxidant signalling in the IMS and cytosol. It also inhibits HIF-1α stabilization and HIF activity in a dose-dependent manner without disrupting cellular oxygen consumption. IMS-PRDX5 expression also attenuates the increase in cytosolic [Ca(2+)] in PASMCs during hypoxia. These results extend previous work by demonstrating the importance of IMS-derived ROS signalling in both the HIF and lung vascular responses to hypoxia.