Microencapsulation aims to protect polyunsaturated fatty acids against oxidation by embedding oil droplets in a solid matrix. In such a system the internal (dissolved and entrapped) and external (in the environment) oxygen can be differentiated. The study aims to quantify the impact of both oxygen sources on the oxidation of microencapsulated fish oil. The impact of the solubilized oxygen in bulk fish oil is investigated by saturating the oil with nitrogen, synthetic air, and pure oxygen. Even though more dissolved oxygen results in more oxidation products, the difference between the oxidation of the nitrogen and air saturated oil is significant but low. For encapsulated fish oil powders, the internal oxygen is modified by preparing oil‐in‐water emulsions under atmospheric and inert conditions. The feed is atomized and spray dried with either nitrogen or air. Powders are stored under vacuum and in vials and the hydroperoxides and anisidine value are determined in the total‐ and encapsulated oil. The internal oxygen has a minor impact, whereas the external oxygen is the main determinant for autoxidation. Apart from oxidizing the non‐encapsulated oil, the external O2 penetrates into the particle and reacts with the encapsulated oil.Practical Applications: Comparing the contribution of the internal and external oxygen to the oxidative stability shows that the internal O2 plays a minor role and can be neglected. This means that the emulsion preparation as well as the spray drying process can be conducted under ambient conditions. An inert production is not extending the shelf life significantly as long as the external O2 determines oxidation. The focus should be on optimizing the diffusion barrier properties of the wall matrix to reduce the penetration of the external oxygen into the particle system. Alternatively, packaging solution reducing the external O2 will extend the shelf life of the microencapsulated oil.