Emerging evidence indicates that the tumor microenvironmental stress of hypoxia can induce genetic instability in cancer cells. We and others have found that the expression levels of key genes within the DNA mismatch repair (MMR) and homologous recombination (HR) pathways are coordinately repressed by hypoxia. These decreases are associated with functional impairments in both MMR and HR repair under hypoxic conditions, and thus they represent a possible mechanistic explanation for the observed phenomenon of hypoxia-induced genetic instability. In parallel, studies also indicate that several DNA damage response factors are activated in response to hypoxia and subsequent reoxygenation, including ATM/ATR, Chkl/Chk2 and BRCA1. Taken together, these findings reveal that hypoxia induces a unique cellular stress response involving an initial, acute DNA damage response to hypoxia and reoxygenation, followed by a chronic response to prolonged hypoxia in which selected DNA repair pathways are coordinately suppressed. In this review, we discuss these pathways and the possible mechanisms involved, as well as the consequences for genetic instability and tumor progression within the tumor microenvironment.