Ammonia toxicity and morphological changes in gills of juvenile Japanese flounder Paralichthys olivaceus (5.76 ± 0.12 g) were investigated when fish were separately exposed to normal dissolved oxygen (DO) at 6.5 ± 0.5 mg L−1 and supersaturated oxygen at 16.0 ± 2.0 mg L−1 at different ammonia concentrations. Under normal oxygen, ammonia concentrations were tested from 0.04 (control) to 93.3 mg L−1 total ammonia nitrogen (TAN), whereas under oxygen supersaturation, ammonia concentrations ranged from 0.04 (control) to 226.7 mg L−1 TAN in the trial. After exposure to ammonia for 96 h, the ammonia LC50 for fish was 62.48 mg L−1 TAN (0.50 mg L−1 NH3–N) at normal oxygen and 160.71 mg L−1 TAN (0.65 mg L−1 NH3–N) at oxygen supersaturation. Light microscopic observations confirmed that gill damage in normal oxygen was more profound than in oxygen supersaturation when fish were exposed to the same level of TAN (93.3 mg L−1). Furthermore, electron microscopic scanning also showed more crimple, retraction and fibrosis on the secondary lamella surface in fish exposed to normal oxygen than those in fish exposed to supersaturated oxygen at the same TAN (93.3 mg L−1). This study suggests that supersaturated oxygen can increase ammonia tolerance in Japanese flounder through reducing gill damage by ammonia, which partially explains the merit of using pure oxygen injection in intensive fish farming.