The in situ oxygen partial pressure in normal and tumor tissues is in the range of a few percent. Therefore, when studying cell growth in 3D culture systems, it is essential to consider how the physiological oxygen concentration, rather than the one in the ambient air, influences the proliferation parameters. Here, we investigated the effect of reducing oxygen partial pressure from 21% to 5% on cell proliferation rate and regionalization in a 3D tumor spheroid model. We found that 5% oxygen concentration strongly inhibited spheroid growth, changed the proliferation gradient and reduced the 50% In Depth Proliferation index (IDP50), compared with culture at 21% oxygen. We then modeled the oxygen partial pressure profiles using the experimental data generated by culturing spheroids in physioxic and normoxic conditions. Although hypoxia occurred at similar depth in spheroids grown in the two conditions, oxygen partial pressure was a major rate-limiting factor with a critical effect on cell proliferation rate and regionalization only in spheroids grown in physioxic condition and not in spheroids grown at atmospheric normoxia. Our findings strengthen the need to consider conducting experiment in physioxic conditions (i.e., tissue normoxia) for proper understanding of cancer cell biology and the evaluation of anticancer drugs in 3D culture systems.