Background: Many hospitalized patients decline in functional status after discharge, but functional decline in emergency admissions with hypoxemia is unknown. The primary aim of this study was to study functional outcomes as a clinical endpoint in a cohort of patients with acute hypoxemia. Methods: A multicenter prospective observational study was conducted in patients with new-onset hypoxemia emergently admitted to two respiratory departments at a university hospital and an academic teaching hospital. Using the WHO scale, the patients’ functional status 4 weeks before admission and at hospital discharge was assessed. The type and duration of oxygen therapy, hospital length of stay and survival and risk of hypercapnic failure were recorded. Results: A total of 151 patients with a median age of 74 were included. Two-thirds declined in functional status by at least one grade at discharge. A good functional status (OR 4.849 (95% CI 2.209–10.647)) and progressive cancer (OR 6.079 (1.197–30.881)) were more associated with functional decline. Most patients were treated with conventional oxygen therapy (n = 95, 62%). The rates of in-hospital mortality and need for intubation were both 8%. Conclusions: Patients with acute hypoxemia in the emergency room have a poorer functional status after hospital discharge. This decline may be of multifactorial origin.