Diverse extrinsic and intrinsic cues must be integrated within a developing organism to ensure appropriate growth at the cellular and organismal level. In Drosophila, the insulin receptor/TOR/S6K signaling network plays a fundamental role in the control of metabolism and cell growth. Here we show that scylla and charybdis, two homologous genes identified as growth suppressors in an EP (enhancer/promoter) overexpression screen, act as negative regulators of growth. The simultaneous loss of both genes generates flies that are more susceptible to reduced oxygen concentrations (hypoxia) and that show mild overgrowth phenotypes. Conversely, scylla or charybdis overactivation reduces growth. Growth inhibition is associated with a reduction in S6K but not PKB/Akt activity. Together, genetic and biochemical analysis places Scylla/Charybdis downstream of PKB and upstream of TSC. Furthermore, we show that scylla and charybdis are induced under hypoxic conditions and that scylla is a target of Drosophila HIF-1 (hypoxia-inducible factor-1) like its mammalian counterpart RTP801/REDD1, thus establishing a potential cross-talk between growth and oxygen sensing.