The aim of the present study was to examine the effect of culture under 5 and 20% oxygen on the development, differentiation and viability of zygotes and in-vivo-produced embryos at the 2-cell and 8-cell stages of development. First, zygotes collected in a common pool were cultured in 20% O2 for 0, 23, 46 and 95 h. Zygotes and in-vivo-produced embryos at the 2-cell and 8-cell stages of development were then cultured in 5 or 20% O2. The proportion of embryos reaching the compaction and blastocyst stages of development did not differ between groups regardless of the period of time embryos were cultured in 20% O2 or the stage at beginning of culture. Duration of culture under 20% O2 had a significant effect on total number of blastocyst cells. A stage-specific effect was observed on total and trophectoderm cell numbers in blastocysts resulting from the culture of zygotes and in-vivo-produced embryos under 20% O2. ICM and percent ICM development was significantly decreased by culture in 20% O2 at all stages examined. Oxygen concentration had no effect on implantation rate and fetal weights upon embryo transfer. However, transfer of zygotes grown to the blastocyst stage in 20% O2 resulted in a dramatic decrease in fetal development per blastocyst and fetal development per implantation. These results demonstrate that culture of F1 mouse zygotes in 20% O2 compromises the developmental potential of resultant blastocysts, which appear to be normal on morphological assessment.