Activation of the serine-threonine kinase Akt promotes the survival and proliferation of various cancers. Hypoxia promotes the resistance of tumor cells to specific therapies. We therefore explored a possible link between hypoxia and Akt activity. We found that Akt was prolyl-hydroxylated by the oxygen-dependent hydroxylase EglN1. The von Hippel–Lindau protein (pVHL) bound directly to hydroxylated Akt and inhibited Akt activity. In cells lacking oxygen or functional pVHL, Akt was activated to promote cell survival and tumorigenesis. We also identified cancer-associated Akt mutations that impair Akt hydroxylation and subsequent recognition by pVHL, thus leading to Akt hyperactivation. Our results show that microenvironmental changes, such as hypoxia, can affect tumor behaviors by altering Akt activation, which has a critical role in tumor growth and therapeutic resistance.