Dynamic changes in physiologic oxygen are required for proper placenta development; yet, when low-oxygen levels persist, placental development is halted, culminating in preeclampsia (PE), a serious complication of pregnancy. Considering mitochondria’s function is intimately linked to oxygen changes, we investigated the impact of oxygen on mitochondrial dynamics in placental mesenchymal stromal cells (pMSCs) that are vital for proper placental development. Transmission electron microscopy, proximity ligation assays for mitochondrial VDAC1 and endoplasmic reticulum IP3R, and immunoanalyses of p-DRP1 and OPA1, demonstrate that low-oxygen conditions in early 1st trimester and PE promote mitochondrial fission in pMSCs. Increased mitochondrial fission of mesenchymal cells was confirmed in whole PE placental tissue sections. Inhibition of DRP1 oligomerization with MDiVi-1 shows that low oxygen-induced mitochondrial fission is a direct consequence of DRP1 activation, likely via HIF1. Mitophagy, a downstream event prompted by mitochondrial fission, is a prominent outcome in PE, but not 1st trimester pMSCs. We also investigated whether mesenchymal–epithelial interactions affect mitochondrial dynamics of trophoblasts in PE placentae. Exposure of trophoblastic JEG3 cells to exosomes of preeclamptic pMSCs caused heightened mitochondrial fission in the cells via a sphingomyelin-dependent mechanism that was restored by MDiVi-1. Our data uncovered dichotomous regulation of mitochondrial fission and health in human placental mesenchymal cells under physiologic and pathologic hypoxic conditions and its impact on neighboring trophoblast cells.