Seagrasses are a diverse group of angiosperms that evolved to live in shallow coastal waters, an environment regularly subjected to changes in oxygen, carbon dioxide and irradiance. Zostera muelleri is the dominant species in south-eastern Australia, and is critical for healthy coastal ecosystems. Despite its ecological importance, little is known about the pathways of carbon fixation in Z. muelleri and their regulation in response to environmental changes. In this study, the response of Z. muelleri exposed to control and very low oxygen conditions was investigated by using (i) oxygen microsensors combined with a custom-made flow chamber to measure changes in photosynthesis and respiration, and (ii) reverse transcription quantitative real-time PCR to measure changes in expression levels of key genes involved in C metabolism. We found that very low levels of oxygen (i) altered the photophysiology of Z. muelleri, a characteristic of C mechanism of carbon assimilation, and (ii) decreased the expression levels of phosphoenolpyruvate carboxylase and carbonic anhydrase. These molecular-physiological results suggest that regulation of the photophysiology of Z. muelleri might involve a close integration between the C and C, or other CO concentrating mechanisms metabolic pathways. Overall, this study highlights that the photophysiological response of Z. muelleri to changing oxygen in water is capable of rapid acclimation and the dynamic modulation of pathways should be considered when assessing seagrass primary production.