Immunological niches are focal sites of immune activity that can have varying microenvironmental features. Hypoxia is a feature of physiological and pathological immunological niches. The impact of hypoxia on immunity and inflammation can vary depending on the microenvironment and immune processes occurring in a given niche. In physiological immunological niches, such as the bone marrow, lymphoid tissue, placenta and intestinal mucosa, physiological hypoxia controls innate and adaptive immunity by modulating immune cell proliferation, development and effector function, largely via transcriptional changes driven by hypoxia-inducible factor (HIF). By contrast, in pathological immunological niches, such as tumours and chronically inflamed, infected or ischaemic tissues, pathological hypoxia can drive tissue dysfunction and disease development through immune cell dysregulation. Here, we differentiate between the effects of physiological and pathological hypoxia on immune cells and the consequences for immunity and inflammation in different immunological niches. Furthermore, we discuss the possibility of targeting hypoxia-sensitive pathways in immune cells for the treatment of inflammatory disease.