Animals often grow and develop in unpredictable environments where factors like food availability, temperature, and oxygen levels can fluctuate dramatically. To ensure proper sexual maturation into adulthood, juvenile animals need to adapt their growth and developmental rates to these fluctuating environmental conditions. Failure to do so can result in impaired maturation and incorrect body size. Here we describe a mechanism by which Drosophila larvae adapt their development in low oxygen (hypoxia). During normal development, larvae grow and increase in mass until they reach critical weight (CW), after which point a neuroendocrine circuit triggers the production of the steroid hormone ecdysone from the prothoracic gland (PG), which promotes maturation to the pupal stage. However, when raised in hypoxia (5% oxygen), larvae slow their growth and delay their maturation to the pupal stage. We find that, although hypoxia delays the attainment of CW, the maturation delay occurs mainly because of hypoxia acting late in development to suppress ecdysone production. This suppression operates through a distinct mechanism from nutrient deprivation, occurs independently of HIF-1 alpha and does not involve modulation of PTTH, the main neuropeptide that initiates ecdysone production in the PG. Instead, we find that hypoxia lowers the expression of the EGF ligand, spitz, and that the delay in maturation occurs due to reduced EGFR/ERK signaling in the PG. Our study sheds light on how animals can adjust their development rate in response to changing oxygen levels in their environment. Given that hypoxia is a feature of both normal physiology and many diseases, our findings have important implications for understanding how low oxygen levels may impact animal development in both normal and pathological situations.