Heme is an essential molecule with contradictory biological functions. In hemoproteins such as hemglobin and cytochromes protein-bound heme is a prosthetic group serving physiological functions as a transporter for oxygen and electrons. On the other hand free heme can have deleterious effects by generating reactive oxygen species that cause oxidative stress. Consequently, heme homeostasis of the cell must be tightly controlled via regulation of its enzymatic biosynthesis and degradation that are differentially regulated in liver and erythroid cells. Accumulating evidence indicates that heme has potent proinflammatory effects and is involved in the pathogenesis of diseases such as rhabdomyolysis, sickle cell disease and atherosclerosis. The regulation of gene expression by heme in yeast and mammals and the underlying molecular mechanisms are presented. Finally, we discuss the functional significance of the heme-degrading enzyme heme oxygenase-1 and that of heme-binding proteins for the regulation of heme homeostasis.