Abstract Pancreatic ductal adenocarcinoma (PDAC) is characterized by an extensive fibroinflammatory stroma and often experiences conditions of insufficient oxygen availability or hypoxia. Cancer-associated fibroblasts (CAF) are a predominant and heterogeneous population of stromal cells within the pancreatic tumor microenvironment. Here, we uncover a previously unrecognized role for hypoxia in driving an inflammatory phenotype in PDAC CAFs. We identify hypoxia as a strong inducer of tumor IL1ɑ expression, which is required for inflammatory CAF (iCAF) formation. Notably, iCAFs preferentially reside in hypoxic regions of PDAC. Our data implicate hypoxia as a critical regulator of CAF heterogeneity in PDAC.