The cellular adaptive response to hypoxia, mediated by high HIF1[alpha] levels includes metabolic reprogramming, restricted DNA replication and cell division. In contrast to healthy cells, the genome of cancer cells, and Kaposi's sarcoma associated herpesvirus (KSHV) infected cells maintains replication in hypoxia. We show that KSHV infection, despite promoting expression of HIF1[alpha] in normoxia, can also restrict transcriptional activity, and promoted its degradation in hypoxia. KSHV-encoded vCyclin, expressed in hypoxia, mediated HIF1[alpha] cytosolic translocation, and its degradation through a non-canonical lysosomal pathway. Attenuation of HIF1[alpha] levels by vCyclin allowed cells to bypass the block to DNA replication and cell proliferation in hypoxia. These results demonstrated that KSHV utilizes a unique strategy to balance HIF1[alpha] levels to overcome replication arrest and induction of the oncogenic phenotype, which are dependent on the levels of oxygen in the microenvironment.