We present a method for the analysis of steady state diffuse reflectance spectra obtained from vascularized tissue or from tissue simulating phantoms at a single, short source-detector separation. This method uses reasonable assumptions about the structure of the reduced scattering spectrum and basis absorption spectra for oxy- and deoxyhemoglobin, which dominate tissue absorption in the visible region of the spectrum. Using a hybrid P3-diffusion description of light propagation, described originally by Hull and Foster [J. Opt. Soc. Am. A 18, 584-599 (2001)] and suitable for short (approximately 1 mm) source-detector separations and optical properties of tissue at visible wavelengths, we create a forward model of the diffuse reflectance with four free parameters. We demonstrate that this model is able to recover accurately the hemoglobin concentrations and scattering properties from synthetic data generated by Monte Carlo simulation and from reflectance spectra acquired from tissue-simulating phantoms containing intact human erythrocytes. We show also that the method is capable of monitoring carbogen-induced changes in murine tumor oxygenation in vivo. The successful implementation of single, short detector separations enables the measurement of intratumor heterogeneities in hemoglobin oxygen saturation and responses to carbogen using a simple fiber-based probe design.