The mechanism of oxygen sensing in arterial chemoreceptors is unknown but has often been linked to mitochondrial function. A common criticism of this hypothesis is that mitochondrial function is insensitive to physiological levels of hypoxia. Here we investigate the effects of hypoxia (down to 0.5% O2) on mitochondrial function in neonatal rat type-1 cells. The oxygen sensitivity of mitochondrial [NADH] was assessed by monitoring autofluorescence and increased in hypoxia with a P50 of 15 mm Hg (1 mm Hg = 133.3 Pa) in normal Tyrode or 46 mm Hg in Ca2+-free Tyrode. Hypoxia also depolarised mitochondrial membrane potential (ψm, measured using rhodamine 123) with a P50 of 3.1, 3.3 and 2.8 mm Hg in normal Tyrode, Ca2+-free Tyrode and Tyrode containing the Ca2+ channel antagonist Ni2+, respectively. In the presence of oligomycin and low carbonyl cyanide 4-(trifluoromethoxy) phenylhydrazone (FCCP; 75 nm) ψm is maintained by electron transport working against an artificial proton leak. Under these conditions hypoxia depolarised ψm/inhibited electron transport with a P50 of 5.4 mm Hg. The effects of hypoxia upon cytochrome oxidase activity were investigated using rotenone, myxothiazol, antimycin A, oligomycin, ascorbate and the electron donor tetramethyl-p-phenylenediamine. Under these conditions ψm is maintained by complex IV activity alone. Hypoxia inhibited cytochrome oxidase activity (depolarised ψm) with a P50 of 2.6 mm Hg. In contrast hypoxia had little or no effect upon NADH (P50= 0.3 mm Hg), electron transport or cytochrome oxidase activity in sympathetic neurons. In summary, type-1 cell mitochondria display extraordinary oxygen sensitivity commensurate with a role in oxygen sensing. The reasons for this highly unusual behaviour are as yet unexplained.