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Pluripotent stem cells (PSC) possess unlimited proliferation, self-renewal, and a differentiation capacity spanning all germ layers. Appropriate culture conditions are important for the maintenance of self-renewal, pluripotency, proliferation, differentiation, and epigenetic states. Oxygen concentrations vary across different human tissues depending on precise cell location and proximity to vascularisation. The bulk of PSC culture-based research is performed in a physiologically hyperoxic, air oxygen (21% O2) environment, with numerous reports now detailing the impact of a physiologic normoxia (physoxia), low oxygen culture in the maintenance of stemness, survival, morphology, proliferation, differentiation potential, and epigenetic profiles. Epigenetic mechanisms affect multiple cellular characteristics including gene expression during development and cell-fate determination in differentiated cells. We hypothesized that epigenetic marks are responsive to a reduced oxygen microenvironment in PSCs and their differentiation progeny. Here, we evaluated the role of physoxia in PSC culture, the regulation of DNA methylation (5mC (5-methylcytosine) and 5hmC (5-hydroxymethylcytosine)), and the expression of regulatory enzyme DNMTs and TETs. Physoxia enhanced the functional profile of PSC including proliferation, metabolic activity, and stemness attributes. PSCs cultured in physoxia revealed the significant downregulation of DNMT3B, DNMT3L, TET1, and TET3 vs. air oxygen, accompanied by significantly reduced 5mC and 5hmC levels. The downregulation of DNMT3B was associated with an increase in its promoter methylation. Coupled with the above, we also noted decreased HIF1A but increased HIF2A expression in physoxia-cultured PSCs versus air oxygen. In conclusion, PSCs display oxygen-sensitive methylation patterns that correlate with the transcriptional and translational regulation of the de novo methylase DNMT3B.