The beneficial impact of lowering oxygen tension to physiological levels has been demonstrated in a number of stem cell differentiation protocols. The majority of these studies compare normal laboratory oxygen tension with one physiological condition (typically 25% O2). In this article, we investigated whether the full spectrum of physiological oxygen tensions (020% O2) and step-changes in oxygen tension could enhance the production of neural populations from of embryonic stem cells (ESCs). We used a model system for the conversion of mouse ESCs into cells expressing one neuroectoderm stem cell marker (nestin) and two neural markers (beta III tubulin and microtubule-associated protein (MAP2)). 410% O2 was associated with large increases in the total production of viable cells and the highest number of cells expressing Nestin, beta III tubulin, and MAP2. However, 410% O2 also caused a reduction in the percentage of cells expressing all three markers. Step changes in oxygen tension at the mid-point of the differentiation process affected the total production of viable cells and the percentage of cells expressing all three markers. We found that the initial oxygen tension and the magnitude of the step-change were critical variables. A step increase from 0 to 2% O2 mid-way through the protocol resulted in the highest percentage of cells expressing beta III tubulin (86.5%). In conclusion, we have demonstrated that the full spectrum of physiological oxygen tensions and step changes in oxygen tension represent a powerful tool for the optimisation of neural differentiation processes. (C) 2011 American Institute of Chemical Engineers Biotechnol. Prog., 2011