Regulation of erythropoiesis by erythropoietin, proposed already at the beginning of this century, has been greatly enhanced by cloning and expression of the gene of erythropoietin. Erythropoietin gene functions as a housekeeping gene, so that erythropoietin is constitutively produced and is never absent from the blood. Hypoxia activates erythropoietin gene primarily in the kidney and also to a small extent in the liver. Peritubular interstitial cells in the kidney or the kidney tubular cells produce erythropoietin. The modulation of erythropoietin gene expression in the kidney and the liver differs. Kidney cells produce erythropoietin in all-or-non pattern and as the stimulus becomes more severe more cells produce erythropoietin while in the liver individual cells produce more erythropoietin when the stimulus is more severe. Erythropoietin exerts its effect on erythroid progenitor cells after binding to specific receptors that are expressed on target cells, interacts with those cells in the bone marrow stimulating them into cell cycle, supporting the survival of cycling progenitor cells and permitting their final differentiation into cells synthetizing hemoglobin.