Oxygen is not only a nutrient but also an important signaling molecule whose concentration can influence the fate of stem cells. This study details the development of a marker of hypoxic signaling for use with encapsulated cells. Testing of the marker was performed with adipose-derived stem cells (ADSCs) in two-dimensional (2D) and 3D culture conditions in varied oxygen environments. The cells were genetically modified with our hypoxia marker, which produces a red fluorescent protein (DsRed-DR), under the control of a hypoxia-responsive element (HRE) trimer. For 3D culture, ADSCs were encapsulated in poly(ethylene glycol)-based hydrogels. The hypoxia marker (termed HRE DsRed-DR) is built on a recombinant adenovirus and ADSCs infected with the marker will display red fluorescence when hypoxic signaling is active. This marker was not designed to measure local oxygen concentration but rather to show how a cell perceives its local oxygen concentration. ADSCs cultured in both 2D and 3D were exposed to 20% or 1% oxygen environments for 96 h. In 2D at 20% O 2 , the marker signal was not observed during the study period. In 1% O 2 , the fluorescent signal was first observed at 24 h, with maximum prevalence observed at 96 h as 59% -3% cells expressed the marker. In 3D, the signal was observed in both 1% and 20% O 2 . The onset of signal in 1% O 2 was observed at 4 h, reaching maximum prevalence at 96 h with 76% -4% cells expressing the marker. Interestingly, hypoxic signal was also observed in 20% O 2 , with 13% -3% cells showing positive marker signal after 96 h. The transcription factor subunit hypoxia inducible factor-1a was tracked in these cells over the same time period by immunostaining and western blot analysis. Immunostaining results in 2D correlated well with our marker at 72 h and 96 h, but 3D results did not correlate well. The western blotting results in 2D and 3D correlated well with the fluorescent marker. The HRE DsRed-DR virus can be used to track the onset of this response for encapsulated, mesenchymal stem cells. Due to the importance of hypoxic signaling in determination of stem cell differentiation, this marker could be a useful tool for the tissue engineering community.