Insects can experience functional hypoxia, a situation in which O₂ supply is inadequate to meet oxygen demand. Assessing when functional hypoxia occurs is complex, because responses are graded, age and tissue dependent, and compensatory. Here, we compare information gained from metabolomics and transcriptional approaches and by manipulation of the partial pressure of oxygen. Functional hypoxia produces graded damage, including damaged macromolecules and inflammation. Insects respond by compensatory physiological and morphological changes in the tracheal system, metabolic reorganization, and suppression of activity, feeding, and growth. There is evidence for functional hypoxia in eggs, near the end of juvenile instars, and during molting. Functional hypoxia is more likely in species with lower O₂ availability or transport capacities and when O₂ need is great. Functional hypoxia occurs normally during insect development and is a factor in mediating life-history trade-offs.