In early neonates, the fetal circulatory system undergoes dramatic transition to the adult circulatory system. Normally, embryonic connecting vessels, such as the ductus arteriosus and the foramen ovale, close and regress. In the neonatal retina, hyaloid vessels maintaining blood flow in the embryonic retina regress, and retinal vessels take over to form the adult-type circulatory system. This process is regulated by a programmed cell death switch mediated by macrophages via Wnt and angiopoietin 2 pathways. In this study, we seek other mechanisms that regulate this process, and focus on the dramatic change in oxygen environment at the point of birth. The von Hippel-Lindau tumor suppressor protein (pVHL) is a substrate recognition component of an E3-ubiquitin ligase that rapidly destabilizes hypoxia-inducible factor αs (HIF-αs) under normoxic, but not hypoxic, conditions. To examine the role of oxygen-sensing mechanisms in retinal circulatory system transition, we generated retina-specific conditional-knockout mice for VHL (Vhl^α-CreKO mice). These mice exhibit arrested transition from the fetal to the adult circulatory system, persistence of hyaloid vessels and poorly formed retinal vessels. These defects are suppressed by intraocular injection of FLT1-Fc protein [a vascular endothelial growth factor (VEGF) receptor-1 (FLT1)/Fc chimeric protein that can bind VEGF and inhibit its activity], or by inactivating the HIF-1α gene. Our results suggest that not only macrophages but also tissue oxygen-sensing mechanisms regulate the transition from the fetal to the adult circulatory system in the retina.