Skeletal defects commonly suffer from poor oxygen microenvironments resulting from compromised vascularization associated with injury or disease. Adipose stem cells (ASCs) represent a promising cell population for stimulating skeletal repair by differentiating toward the osteogenic lineage or by secreting trophic factors. However, the osteogenic or trophic response of ASCs to reduced oxygen microenvironments is poorly understood. Moreover, a direct comparison between 2D and 3D response of ASCs to hypoxia is lacking. Thus, we characterized the osteogenic and angiogenic potential of human ASCs under hypoxic (1%), normoxic (5%), and atmospheric (21%) oxygen tensions in both 2D and 3D over 4 weeks in culture. We detected greatest alkaline phosphatase activity and extracellular calcium deposition in cells cultured in both 2D and 3D under 21% oxygen, and reductions in enzyme activity corresponded to reductions in oxygen tension. ASCs cultured in 1% oxygen secreted more vascular endothelial growth factor (VEGF) over the 4-week period than cells cultured in other conditions, with cells cultured in 2D secreting VEGF in a more sustained manner than those in 3D. Expression of osteogenic markers revealed temporal changes under different oxygen conditions with peak expression occurring earlier in 3D. In addition, the increase of most osteogenic markers was significantly higher in 2D compared to 3D cultures at 1% and 5% oxygen. These results suggest that oxygen, in conjunction with dimensionality, affects the timing of the differentiation program in ASCs. These findings offer new insights for the use of ASCs in bone repair while emphasizing the importance of the culture microenvironment. J. Cell. Biochem. 110: 87–96, 2010. © 2010 Wiley-Liss, Inc.