Cancer-related deregulation of miRNA biogenesis has been suggested, but the underlying mechanisms remain elusive. Here we report a previously unrecognized effect of hypoxia in the downregulation of Drosha and Dicer in cancer cells that leads to dysregulation of miRNA biogenesis and increased tumour progression. We show that hypoxia-mediated downregulation of Drosha is dependent on ETS1/ELK1 transcription factors. Moreover, mature miRNA array and deep sequencing studies reveal altered miRNA maturation in cells under hypoxic conditions. At a functional level, this phenomenon results in increased cancer progression in vitro and in vivo, and data from patient samples are suggestive of miRNA biogenesis downregulation in hypoxic tumours. Rescue of Drosha by siRNAs targeting ETS1/ELK1 in vivo results in significant tumour regression. These findings provide a new link in the mechanistic understanding of global miRNA downregulation in the tumour microenvironment.