Mesenchymal stem cells (MSCs) are usually cultured under normoxic conditions (21% oxygen). However, in vivo, the physiological "niches" for MSCs have a much lower oxygen tension. Because of their plasticity, stem cells are particularly sensitive to their environments, and oxygen tension is one developmentally important stimulus in stem cell biology and plays a role in the intricate balance between cellular proliferation and commitment towards differentiation. Therefore, we investigated here the effect of hypoxia (2% oxygen) on murine adipose tissue (AT) MSC proliferation and adipogenic differentiation. AT cells were obtained from the omental fat and AT-MSCs were selected for their ability to attach to the plastic dishes, and were grown under normoxic and hypoxic conditions. Prior exposure of MSCs to hypoxia led to a significant reduction of ex vivo expansion time, with significantly increased numbers of Sca-1(+) as well as Sca-1(+)/CD44(+)double-positive cells. Under low oxygen culture conditions, the AT-MSC number markedly increased and their adipogenic differentiation potential was reduced. Notably, the hypoxia-mediated inhibition of adipogenic differentiation was reversible: AT-MSCs pre-exposed to hypoxia when switched to normoxic conditions exhibited significantly higher adipogenic differentiation capacity compared to their pre-exposed normoxic-cultured counterparts. Accordingly, the expression of adipocyte-specific genes, peroxisome proliferator activated receptor gamma (Ppargamma), lipoprotein lipase (Lpl) and fatty acid binding protein 4 (Fabp4) were significantly enhanced in hypoxia pre-exposed AT-MSCs. In conclusion, pre-culturing MSCs under hypoxic culture conditions may represent a strategy to enhance MSC production, enrichment and adipogenic differentiation.