Reductions in oxygen availability (O₂) by either reduced arterial O₂ content or reduced perfusion pressure can have profound influences on the circulation, including vasodilation in skeletal muscle vascular beds. The purpose of this review is to put into context the present evidence regarding mechanisms responsible for the local control of blood flow during acute systemic hypoxia and/or local hypoperfusion in contracting muscle. The combination of submaximal exercise and hypoxia produces a “compensatory” vasodilation and augmented blood flow in contracting muscles relative to the same level of exercise under normoxic conditions. A similar compensatory vasodilation is observed in response to local reductions in oxygen availability (i.e., hypoperfusion) during normoxic exercise. Available evidence suggests that nitric oxide (NO) contributes to the compensatory dilator response under each of these conditions, whereas adenosine appears to only play a role during hypoperfusion. During systemic hypoxia the NO-mediated component of the compensatory vasodilation is regulated through a β-adrenergic receptor mechanism at low-intensity exercise, while an additional (not yet identified) source of NO is likely to be engaged as exercise intensity increases during hypoxia. Potential candidates for stimulating and/or interacting with NO at higher exercise intensities include prostaglandins and/or ATP. Conversely, prostaglandins do not appear to play a role in the compensatory vasodilation during exercise with hypoperfusion. Taken together, the data for both hypoxia and hypoperfusion suggest NO is important in the compensatory vasodilation seen when oxygen availability is limited. This is important from a basic biological perspective and also has pathophysiological implications for diseases associated with either hypoxia or hypoperfusion.