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Abstract In almost all animals, physiologically low oxygen (hypoxia) during development slows growth and reduces adult body size. The developmental mechanisms that determine growth under hypoxic conditions are, however, poorly understood. Here we show that the growth and body size response to moderate hypoxia (10% O 2 ) in Drosophila melanogaster is systemically regulated via the steroid hormone ecdysone. Hypoxia increases level of circulating ecdysone and inhibition of ecdysone synthesis ameliorates the negative effect of low oxygen on growth. We also show that the effect of ecdysone on growth under hypoxia is through suppression of the insulin/IGF-signaling pathway, via increased expression of the insulin-binding protein Imp-L2 . These data indicate that growth suppression in hypoxic Drosophila larvae is accomplished by a systemic endocrine mechanism that overlaps with the mechanism that slows growth at low nutrition. This suggests the existence of growth-regulatory mechanisms that respond to general environmental perturbation rather than individual environmental factors.