Knowledge of the molecular mechanisms that underlie the regulation of major adaptive responses to an unbalanced oxygen tension is central to understanding tissue homeostasis and disease. Hypoxia-inducible transcription factors (HIFs) coordinate changes in the transcriptome that control these adaptive responses. Here, we focused on the functional role of the transcriptional repressor basic-helix-loop-helix family member e40 (Bhlhe40), which we previously identified in a meta-analysis as one of the most consistently upregulated genes in response to hypoxia across various cell types. We investigated the role of Bhlhe40 in controlling proliferation and angiogenesis using a gene editing strategy in mouse embryonic stem cells (mESCs) that we differentiated in embryoid bodies (EBs). We observed that hypoxia-induced Bhlhe40 expression was compatible with the rapid proliferation of pluripotent mESCs under low oxygen tension. However, in EBs, hypoxia triggered a Bhlhe40-dependent cell cycle arrest in most progenitor cells and endothelial cells within vascular structures. Furthermore, Bhlhe40 knockout increased the basal vascularization of the EBs in normoxia and exacerbated the hypoxia-induced vascularization, supporting a novel role for Bhlhe40 as a negative regulator of blood vessel formation. Our findings implicate Bhlhe40 in mediating key functional adaptive responses to hypoxia, such as proliferation arrest and angiogenesis.