One physiological mechanism used by reptiles to remain within thermal optima is their ability to reversibly alter skin colour, imparting changes in overall reflectance, and influencing the rate of heat gain from incident radiation. The ability to lighten or darken their skin is caused by the movement of pigment within the dermal chromatophore cells. Additionally, lizards, as ectotherms, significantly lower their preferred body temperatures when experiencing stressors such as hypoxia. This decrease in preferred temperature has been proposed to be the result of a downward adjustment of the thermal set-point, the temperature around which the body temperature is typically defended. We tested the hypothesis that lightening of the skin in lizards would be modified by hypoxia in a manner consistent with the known reduction in preferred temperatures. Skin colouration values of the dorsal skin of bearded dragons were analysed at three different levels of oxygen (20.8, 9.9 and 4.9 kPa) and at temperatures spanning the preferred temperature range (30, 32, 34, 36, 38 and 40 C). Hypoxic lizards lightened their skin at lower ambient temperatures more than normoxic ones, and in an oxygen-dependent fashion. The orchestrated adjustment of skin reflectance suggests that this physiological trait is being regulated at a new and lower set-point. Evidence from this study demonstrates that skin colouration plays a role in body temperature regulation and that the reduction in temperature set-point so prevalent in hypoxia is also manifested in this physiological trait.