The skin is made up of different layers with various gradients, which maintain a complex microenvironment, particularly in terms of oxygen levels. However, all types of skin cells are cultured in conventional incubators that do not reproduce physiological oxygen levels. Instead, they are cultured at atmospheric oxygen levels, a condition that is far removed from physiology and may lead to the generation of free radicals known to induce skin ageing. This review aims to summarize the current literature on the effect of physiological oxygen levels on skin cells, highlight the shortcomings of current in vitro models, and demonstrate the importance of respecting skin oxygen levels. We begin by clarifying the terminology used about oxygen levels and describe the specific distribution of oxygen in the skin. We review and discuss how skin cells adapt their oxygen consumption and metabolism to oxygen levels environment, as well as the changes that are induced, particularly, their redox state, life cycle and functions. We examine the effects of oxygen on both simple culture models and more complex reconstructed skin models. Finally, we present the implications of oxygen modulation for a more therapeutic approach.