The present study determined the pituitary-adrenal responses to acute hypoxemia after a period of reversible adverse intrauterine conditions produced by partial compression of the umbilical cord for 3 days in the sheep fetus during late gestation. At 118 ± 2 days gestation (term is ∼145 days), 12 sheep fetuses were instrumented under halothane anesthesia with an occluder cuff around the umbilical cord, amniotic and vascular catheters, and a transit-time flow probe around an umbilical artery. In 6 of the fetuses at 125 days, umbilical blood flow was reduced by about 30% from baseline for 3 days (UCC), after which the occluder was deflated. The remaining 6 fetuses acted as sham-operated controls in which the occluder was not inflated. All fetuses were then subsequently subjected to 2 periods of acute hypoxemia, elicited by reducing the maternal inspired fraction of oxygen (FiO₂) at 2 ± 1 and 5 ± 2 days after the end of cord compression or sham compression. In addition, 4 fetuses from each group were subjected to an ACTH challenge 1–2 days after the final episode of acute hypoxemia. Maternal and fetal arterial blood samples were taken at appropriate intervals during cord compression, acute hypoxemia, and ACTH challenge for analyses of blood gases, pH, and plasma ACTH and cortisol concentrations. Partial compression of the umbilical cord produced reversible mild fetal asphyxia, a transient increase in fetal plasma ACTH, and a progressive increase in fetal plasma cortisol. At 5 ± 2 days after the end of compression, despite similar blood gas status between the groups, basal plasma cortisol, but not ACTH, concentrations were significantly greater in compressed fetuses relative to sham controls. However, this dissociation did not affect a similar increment in fetal plasma ACTH and cortisol concentrations during acute hypoxemia or in the fetal plasma cortisol response to the ACTH challenge in either group. An increase in adrenocortical mass occurred in fetuses preexposed to partial compression of the umbilical cord relative to sham controls. The data suggest that fetal exposure to a reversible period of adverse intrauterine conditions produced by partial compression of the umbilical cord does not affect the magnitude of the fetal hypothalamic-pituitary-adrenal axis response to subsequent acute hypoxemia, but it leads to resetting of basal hypothalamic-pituitary-adrenal axis function in the fetus. The mechanism for this resetting may include an increase in adrenocortical steroidogenic synthetic capacity, but it is not due to a change in adrenocortical sensitivity to ACTH. Inappropriate fetal glucocorticoid exposure after reversible periods of adverse intrauterine conditions has important implications for fetal and postnatal development.