Inactivation of the von Hippel-Lindau tumor suppressor, pVHL, is associated with both hereditary and sporadic renal cysts and renal cell carcinoma, which are commonly thought to arise from the renal proximal tubule. pVHL regulates the protein stability of hypoxia-inducible factor (HIF)-alpha subunits and loss of pVHL function leads to HIF stabilization. The role of HIF in the development of VHL-associated renal lesions remains to be determined. To investigate the functional consequences of pVHL inactivation and the role of HIF signaling in renal epithelial cells, we used the phosphoenolpyruvate carboxykinase (PEPCK) promoter to generate transgenic mice in which Cre-recombinase is expressed in the renal proximal tubule and in hepatocytes. We found that conditional inactivation of VHL in PEPCK-Cre mutants resulted in renal cyst development that was associated with increased erythropoietin levels and polycythemia. Increased expression of the HIF target gene erythropoietin was limited to the liver, whereas expression of carbonic anhydrase 9 and multidrug resistance gene 1 was up-regulated in the renal cortex of mutant mice. Inactivation of the HIF-alpha binding partner, arylhydrocarbon receptor nuclear translocator (Arnt), but not Hif-1alpha, suppressed the development of renal cysts. Here, we present the first mouse model of VHL-associated renal disease that will provide a basis for further genetic studies to define the molecular events that are required for the progression of VHL-associated renal cysts to clear cell renal cell carcinoma.