During human pregnancy, the trophoblast develops from differentiation of cytotrophoblast cells into an endocrine active syncytiotrophoblast. In culture, isolated mononuclear cytotrophoblasts aggregate and then fuse to form a syncytium, reproducing the in vivo process. In this study, we examined the effect of low oxygen tension (approximately 9%, hypoxia) compared to standard conditions (approximately 19% oxygen, normoxia) on these cellular events. Under hypoxia, syncytial formation was less frequently observed, cell staining and electron microscopy revealed that cytotrophoblasts remain aggregated, with a positive proliferative cell nuclear antigen (PCNA) immunostaining. Desmoplakin and E‐cadherin, both known to disappear with cytotrophoblast fusion, showed persistent expression in hypoxic cells after 3 days of culture. In contrast, the expression of actin and ezrin, two cytoskeletal proteins, was unchanged. hCG secretion and hPL expression were both decreased in hypoxic cells, reflecting a reduced syncytial formation. Thus, on day 3, the mean values for hCG secretion were 1,100 ± 155 and 289 ± 26 mlU/mL in normoxic and hypoxic conditions, respectively. The reduced cell fusion process as well as hCG secretion and hPL expression under hypoxia were reversed by reoxygenation of the cells. We conclude that under hypoxia, the formation of functional syncytiotrophoblast is impaired due to a defect in the cytotrophoblast fusion process. This may explain the observation of a higher number of cytotrophoblast cells and a reduced syncytial layer in placentas of some pathological pregnancies. © 1996 Wiley‐Liss, Inc.