Development of the human placenta takes place in contrasting oxygen concentrations at different stages of gestation, from ~20 mmHg during the first trimester rising to ~60 mmHg at the start of the second trimester before gradually declining to ~40 mmHg at term. In view of these changes the early placenta has been described as ‘hypoxic’. However, placental metabolism is heavily glycolytic, supported by the rich supply of glucose from the endometrial glands, and there is no evidence of energy compromise. On the contrary, the trophoblast is highly proliferative, with the physiological low-oxygen environment promoting maintenance of stemness in progenitor populations. These conditions favour formation of the cytotrophoblastic shell that encapsulates the conceptus, and interfaces with the endometrium. Extravillous trophoblast cells on the outer surface of the shell undergo an epithelial-mesenchymal transition and acquire invasive potential. Experimental evidence suggests these changes may be mediated by the higher oxygen concentration present within the placental bed. Interpreting in vitro data is often difficult, however, due to the use of non-physiological oxygen concentrations and trophoblast-like cell lines or explant models. Trophoblast is more vulnerable to hyperoxia or fluctuating levels of oxygen than hypoxia, and some degree of placental oxidative stress likely occurs in all pregnancies towards term. In complications of pregnancy, such as early-onset pre-eclampsia, malperfusion generates high levels of oxidative stress, causing release of factors that precipitate the maternal syndrome. Further experiments are required using genuine trophoblast progenitor cells and physiological concentrations to fully elucidate the pathways by which oxygen regulates placental development.