Key points Arterial chemoreceptors measure blood oxygen and are involved in the control of both breathing and the cardiovascular system. Oxygen is mostly used by cells in their mitochondria to generate energy. In this study we have investigated the effects of oxygen starvation (hypoxia) on the mitochondria of specialised oxygen sensing cells from arterial chemoreceptors. Our data confirm that the mitochondria of these oxygen sensing cells are unusually sensitive to modest hypoxia. This effect seems to stem from a reduced affinity of the oxygen utilising enzyme cytochrome oxidase for oxygen. These results are consistent with a functional adaptation of the mitochondria of oxygen sensing cells that may enable them to play a direct role in the oxygen sensing process itself. Abstract  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.