Hypoxia-inducible factor (HIF) is a transcriptional activator with a central role in regulating cellular responses to hypoxia. It is also emerging as a major target for viral manipulation of the cellular environment. Under normoxic conditions, HIF is tightly suppressed by the activity of oxygen-dependent prolyl and asparaginyl hydroxylases. The asparaginyl hydroxylase active against HIF, factor inhibiting HIF (FIH), has also been shown to hydroxylate some ankyrin repeat (ANK) proteins. Using bioinformatic analysis, we identified the five ANK proteins of the parapoxvirus orf virus (ORFV) as potential substrates of FIH. Consistent with this prediction, coimmunoprecipitation of FIH was detected with each of the ORFV ANK proteins, and for one representative ORFV ANK protein, the interaction was shown to be dependent on the ANK domain. Immunofluorescence studies revealed colocalization of FIH and the viral ANK proteins. In addition, mass spectrometry confirmed that three of the five ORFV ANK proteins are efficiently hydroxylated by FIH in vitro. While FIH levels were unaffected by ORFV infection, transient expression of each of the ORFV ANK proteins resulted in derepression of HIF-1α activity in reporter gene assays. Furthermore, ORFV-infected cells showed upregulated HIF target gene expression. Our data suggest that sequestration of FIH by ORFV ANK proteins leads to derepression of HIF activity. These findings reveal a previously unknown mechanism of viral activation of HIF that may extend to other members of the poxvirus family.