Cellular metabolism is a critical regulator of macrophage effector function. Tissue-resident alveolar macrophages (TR-AMs) inhabit a unique niche marked by high oxygen and low glucose. We have recently shown that in contrast to bone marrow-derived macrophages (BMDMs), TR-AMs do not utilize glycolysis and instead predominantly rely on mitochondrial function for their effector response. It is not known how changes in local oxygen concentration that occur during conditions such as acute respiratory distress syndrome (ARDS) might affect TR-AM metabolism and function; however, ARDS is associated with progressive loss of TR-AMs, which correlates with the severity of disease and mortality. Here, we demonstrate that hypoxia robustly stabilizes HIF-1α in TR-AMs to promote a glycolytic phenotype. Hypoxia altered TR-AM metabolite signatures, cytokine production, and decreased their sensitivity to the inhibition of mitochondrial function. By contrast, hypoxia had minimal effects on BMDM metabolism. The effects of hypoxia on TR-AMs were mimicked by FG-4592, a HIF-1α stabilizer. Treatment with FG-4592 decreased TR-AM death and attenuated acute lung injury in mice. These findings reveal the importance of microenvironment in determining macrophage metabolic phenotype and highlight the therapeutic potential in targeting cellular metabolism to improve outcomes in diseases characterized by acute inflammation.