Cytotoxic T lymphocytes (CTLs) used in immunotherapy are typically cultured under atmospheric O2 pressure but encounter hypoxic conditions inside tumors. Activating CTLs under hypoxic conditions has been shown to improve their cytotoxicity in vitro, but the mechanism employed and the implications for immunotherapy remain unknown. We activated and cultured OT-I CD8 T cells at either 1% or 20% O2. Hypoxic CTLs survived, as well as normoxic ones, in vitro but killed OVA-expressing B16 melanoma cells more efficiently. Hypoxic CTLs contained similar numbers of cytolytic granules and released them as efficiently but packaged more granzyme-B in each granule without producing more perforin. We imaged CTL distribution and motility inside B16-OVA tumors using confocal and intravital 2-photon microscopy and observed no obvious differences. However, mice treated with hypoxic CTLs exhibited better tumor regression and survived longer. Thus, hypoxic CTLs may perform better in tumor immunotherapy because of higher intrinsic cytotoxicity rather than improved migration inside tumors.