The oxygen concentration used during embryo culture can influence embryo development and quality. Reducing the oxygen concentration in the atmosphere to 2% during post-compaction culture of mouse embryos perturbs embryonic gene expression. This study examined the effect of culturing mouse embryos under different oxygen concentrations on subsequent fetal and placental development. Embryos were cultured from the zygote to morula stage under 7% oxygen, followed by 20, 7 or 2% oxygen to the blastocyst stage. Cultured and in vivo developed blastocysts were transferred into pseudopregnant recipients. Fetal and placental outcomes were analysed at day 18 of pregnancy. Implantation rate was not influenced by embryo culture conditions, but resorption rates were increased in embryos cultured under 2% oxygen, compared with 7% oxygen. Day 18 fetal weights were reduced following culture under 2%, compared with 7 or 20% oxygen, or in vivo development. Placental weight was not influenced by culture conditions. No differences in the proportion of junctional or labyrinthine exchange regions within the placenta or the morphometry of the labyrinthine region were detected. Surface density (surface area/gram labyrinth) of trophoblast available for exchange was reduced in placentas developed from embryos cultured under 2% oxygen, compared with 7% oxygen. Placental gene expression of Slc2a1, Slc2a3, Igf2, Igf2r and H19 was not influenced by oxygen conditions during embryo culture. Thus, exposure to 2% oxygen during post-compaction pre-implantation embryo development has adverse consequences for fetal development in the mouse. Oxygen is a significant component of the embryonic environment and reductions in oxygen availability can influence both embryonic gene expression and subsequent fetal development.