We present an in vitro model of human skin that, together with nonlinear optical microscopy, provides a useful system for characterizing morphological and structural changes in a living skin tissue microenvironment due to changes in oxygen status and proteolytic balance. We describe for the first time the effects of chronic oxygen deprivation on a bioengineered model of human interfollicular epidermis. Histological analysis and multiphoton imaging revealed a progressively degenerating ballooning phenotype of the keratinocytes that manifested after 48 h of hypoxic exposure. Multiphoton images of the dermal compartment revealed a decrease in collagen structural order. Immunofluorescence analysis showed changes in matrix metalloproteinase (MMP)-2 protein spatial localization in the epidermis with a shift to the basal layer, and loss of Ki67 expression in proliferative basal cells after 192 h of hypoxic exposure. Upon reoxygenation MMP-2 mRNA levels showed a biphasic response, with restoration of MMP-2 levels and localization. These results indicate that chronic oxygen deprivation causes an overall degeneration in tissue architecture, combined with an imbalance in proteolytic expression and a decrease in proliferative capacity. We propose that these tissue changes are representative of the ischemic condition and that our experimental model system is appropriate for addressing mechanisms of susceptibility to chronic wounds.