Coordinated interactions between the embryo/fetus and its environment are critical for proper development. In addition to acting as metabolic substrates for cellular homeostasis, basic physiological factors, such as oxygen tension, have a profound influence on developmental outcomes. Since the mammalian embryo resides in a physiologically hypoxic environment during gestation, understanding its responses to oxygen deprivation on a cellular level is critical. In this review, we analyze interactions between the hypoxia-inducible factor family of transcriptional regulators and epigenetic mechanisms governing chromatin structure. The ability of hypoxia-inducible factors to interact physically with histone deacetylase (HDAC) enzymes and modulate nuclear HDAC activities places them in the pivotal position of integrating physiological and epigenetic effectors. Multiple embryonic and extra-embryonic stem cell populations in mice and humans rely on this interaction – an important determinant of stem cell fate. Dissection of the pathways involved will provide novel insights into the metabolic as well as molecular determinants of the stem cell niches that allow self-renewal of progenitors in an undifferentiated state.