Seasonal development of dissolved-oxygen deficits (hypoxia) represents an acute system-level perturbation to ecological dynamics and fishery sustainability in coastal ecosystems around the globe. Whereas anthropogenic nutrient loading has increased the frequency and severity of hypoxia in estuaries and semi-enclosed seas, the occurrence of hypoxia in open-coast upwelling systems reflects ocean conditions that control the delivery of oxygen-poor and nutrient-rich deep water onto continental shelves. Upwelling systems support a large proportion of the world's fisheries, therefore understanding the links between changes in ocean climate, upwelling-driven hypoxia and ecological perturbations is critical. Here we report on the unprecedented development of severe inner-shelf (<70 m) hypoxia and resultant mass die-offs of fish and invertebrates within the California Current System. In 2002, cross-shelf transects revealed the development of abnormally low dissolved-oxygen levels as a response to anomalously strong flow of subarctic water into the California Current System. Our findings highlight the sensitivity of inner-shelf ecosystems to variation in ocean conditions, and the potential impacts of climate change on marine communities.