Objectives Postpartum haemorrhage (PPH) is a major cause of maternal mortality and morbidity worldwide. Experimental studies support the hypothesis that oxytocin administration during labour, a common although not evidence-based practice, may increase the risk of atonic PPH. The clinical studies, however, are inconclusive. The objectives of this study was to investigate the association between the level of oxytocin exposure during labour and the risk of severe PPH and to explore whether the prophylactic use of oxytocin after birth modifies this association. Design Population-based, cohort-nested case-control study. Setting 106 French hospitals from December 2004 through November 2006. Participants Women with term singleton vaginal deliveries, after an uncomplicated pregnancy. Cases were 1483 women with severe PPH, defined by peripartum change in haemoglobin of ≥4 g/dl or need for blood transfusion. Controls were 1758 women from a random sample of parturients without PPH. Main outcome measures The independent association between the level of oxytocin during labour and the risk of severe PPH was tested and quantified with ORs through two-level multivariable logistic regression modelling. Results Oxytocin was administered during labour to 73% of cases and 61% of controls (crude OR: 1.7, 95% CI 1.5 to 2.0). After adjustment for all potential confounders, oxytocin during labour was associated with a significantly higher risk of severe PPH (adjusted OR: 1.8, 95% CI 1.3 to 2.6) in women who did not receive prophylactic oxytocin after delivery; the OR for haemorrhage increased from 1 to 5 according to the level of oxytocin exposure. In women who had prophylactic oxytocin after delivery, this association was significant only for the highest exposure categories. Conclusions Oxytocin during labour appears to be an independent risk factor for severe PPH. The results emphasise the need for guidelines clarifying the evidence-based indications for this procedure and the minimal useful regimens.