Heme is an essential molecule with contradictory biological functions. In hemoproteins such as hemoglobin 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. The biosynthesis of heme is catalyzed by eight enzymes that are differentially regulated in liver and erythroid cells. Recent findings on proinflammatory functions of heme and its role in the pathogenesis of diseases, such as rhabdomyolysis or atherosclerosis are summarized. The regulation of gene expression by heme in yeast and mammalian cells and the underlying molecular mechanisms are presented. Finally, we discuss the functional significance of the heme-degrading enzyme heme oxygenase and hemebinding proteins for the regulation of heme homeostasis.