The iron-regulatory proteins (IRPs) posttranscriptionally regulate expression of transferrin receptor, ferritin, and other iron metabolism proteins. Although both IRPs can regulate expression of the same target genes, IRP2^–/– mice significantly misregulate iron metabolism and develop neurodegeneration, whereas IRP1^–/– mice are spared. We found that IRP2^–/– cells misregulated iron metabolism when cultured in 3 to 6% oxygen, which is comparable to physiological tissue concentrations, but not in 21% oxygen, a concentration that activated IRP1 and allowed it to substitute for IRP2. Thus, IRP2 dominates regulation of mammalian iron homeostasis because it alone registers iron concentrations and modulates its RNA-binding activity at physiological oxygen tensions.