Oxygen depletion in estuaries is a worldwide problem with detrimental effects on many organisms. Although nutrient loading has been stabilized for a number of these systems, seasonal hypoxia persists and displays large year‐to‐year variations, with larger hypoxic volumes in wetter years and smaller hypoxic volumes in drier years. Data analysis points to climate as a driver of interannual hypoxia variability, but nutrient inputs covary with freshwater flow. Here we report an oxygen budget analysis of Chesapeake Bay to quantify relative contributions of physical and biogeochemical processes. Vertical diffusive flux declines with river discharge, whereas longitudinal advective flux increases with river discharge, such that their total supply of oxygen to bottom water is relatively unchanged. However, water column respiration exhibits large interannual fluctuations and is correlated with primary production and hypoxic volume. Hence, the model results suggest that nutrient loading is the main mechanism driving interannual hypoxia variability in Chesapeake Bay.