Plasticity in hatching timing allows embryos to balance egg- and larval-stage risks, and depends on the ability of hatching-competent embryos to continue developing in the egg. Hypoxia can slow development, kill embryos and induce premature hatching. For terrestrial eggs of red-eyed treefrogs, the embryonic period can extend approximately 50% longer than development to hatching competence, and development is synchronous across perivitelline oxygen levels (PO2) ranging from 0.5-16.5 kPa. Embryos maintain large external gills until hatching, then gills regress rapidly. We assessed the respiratory value of external gills using gill manipulations and closed-system respirometry. Embryos without external gills were oxygen limited in air and hatched at an external PO2 of 17 kPa, whereas embryos with gills regulated their metabolism and remained in the egg at substantially lower PO2. By contrast, tadpoles gained no respiratory benefit from external gills. We videotaped behavior and manipulated embryos to test if they position gills near the air-exposed portion of the egg surface, where PO2 is highest. Active embryos remained stationary for minutes in gills-at-surface positions. After manipulations and spontaneous movements that positioned gills in the O2-poor region of the egg, however, they returned their gills to the air-exposed surface within seconds. Even neural tube stage embryos, capable only of ciliary rotation, positioned their developing head in the region of highest PO2. Such behavior may be critical both to delay hatching after hatching competence and to obtain sufficient oxygen for normal, synchronous development at earlier stages.