Tumor-associated macrophages (TAM) are exposed to multiple microenvironmental cues in tumors, which collaborate to endow these cells with protumoral activities. Hypoxia, caused by an imbalance in oxygen supply and demand because of a poorly organized vasculature, is often a prominent feature in solid tumors. However, to what extent tumor hypoxia regulates the TAM phenotype in vivo is unknown. Here, we show that the myeloid infiltrate in mouse lung carcinoma tumors encompasses two morphologically distinct CD11b(hi)F4/80(hi)Ly6C(lo) TAM subsets, designated as MHC-II(lo) and MHC-II(hi) TAM, both of which were derived from tumor-infiltrating Ly6C(hi) monocytes. MHC-II(lo) TAM express higher levels of prototypical M2 markers and reside in more hypoxic regions. Consequently, MHC-II(lo) TAM contain higher mRNA levels for hypoxia-regulated genes than their MHC-II(hi) counterparts. To assess the in vivo role of hypoxia on these TAM features, cancer cells were inoculated in prolyl hydroxylase domain 2 (PHD2)-haplodeficient mice, resulting in better-oxygenated tumors. Interestingly, reduced tumor hypoxia did not alter the relative abundance of TAM subsets nor their M2 marker expression, but specifically lowered hypoxia-sensitive gene expression and angiogenic activity in the MHC-II(lo) TAM subset. The same observation in PHD2(+/+) → PHD2(+/-) bone marrow chimeras also suggests organization of a better-oxygenized microenvironment. Together, our results show that hypoxia is not a major driver of TAM subset differentiation, but rather specifically fine-tunes the phenotype of M2-like MHC-II(lo) TAM.