Hypoxemia is a defining feature of acute respiratory distress syndrome (ARDS), an often-fatal complication of pulmonary or systemic inflammation, yet the resulting tissue hypoxia, and its impact on immune responses, is often neglected. In the present study, we have shown that ARDS patients were hypoxemic and monocytopenic within the first 48 h of ventilation. Monocytopenia was also observed in mouse models of hypoxic acute lung injury, in which hypoxemia drove the suppression of type I interferon signaling in the bone marrow. This impaired monopoiesis resulted in reduced accumulation of monocyte-derived macrophages and enhanced neutrophil-mediated inflammation in the lung. Administration of colony-stimulating factor 1 in mice with hypoxic lung injury rescued the monocytopenia, altered the phenotype of circulating monocytes, increased monocyte-derived macrophages in the lung and limited injury. Thus, tissue hypoxia altered the dynamics of the immune response to the detriment of the host and interventions to address the aberrant response offer new therapeutic strategies for ARDS.