Background In the bone marrow mesenchymal stromal cells and osteoblasts form functional niches for hematopoietic stem and progenitor cells. This microenvironment can be partially mimicked using in vitro co-culture systems. In this study, we examined the oxygen tension in three distinct compartments in a co-culture system of purified CD34 ⁺ cells and mesenchymal stromal cells with regard to different spatial localizations. Design and Methods Hypoxic cells in the co-culture were visualized by pimonidazole staining. Hematopoietic cell distribution, and functional and phenotypic characteristics were analyzed by flow cytometry. The secretion of vascular endothelial growth factor and stromal-derived factor-1 by mesenchymal stromal cells in low oxygen co-cultures was determined by an enzyme-linked immunosorbent assay. The effect of co-culture medium on the hematopoietic cell migration potential was tested in a transwell assay. Results In co-cultures under atmospheric oxygen tension, regions of low oxygen tension could be detected beneath the feeder layer in which a reservoir of phenotypically more primitive hematopoietic cells is located in vitro. In low oxygen co-culture, the adhesion of hematopoietic cells to the feeder layer was decreased, whereas hematopoietic cell transmigration beneath mesenchymal stromal cells was favored. Increased vascular endothelial growth factor-A secretion by mesenchymal stromal cells under low oxygen conditions, which increased the permeability of the monolayer, was responsible for this effect. Furthermore, vascular endothelial growth factor-A expression in low oxygen mesenchymal stromal cells was induced via hypoxia- inducible factor signaling. However, stromal cell-derived factor-1 secretion by mesenchymal stromal cells was down-regulated under low oxygen conditions in a hypoxia-inducible factorindependent manner. Conclusions We demonstrate for the first time that differences in oxygen tension cause selective modification of hematopoietic cell and mesenchymal stromal cell interactions in a co-culture system, thus confirming that oxygen tension plays a critical role in the interaction between hematopoietic cells and the niche environment.