The primary aim of this study was to investigate the effect of systemic poikilocapnic hypoxia on forearm cutaneous thermal hyperaemia. A secondary aim was to examine the relationship between the individual susceptibility to oxygen desaturation and cutaneous vasodilator capacity. Twelve healthy participants (seven male) were exposed to 9 h of normoxia and 12% poikilocapnic hypoxia in a temperature‐ and humidity‐controlled environmental chamber. Skin blood flow was assessed at the ventral forearm using laser Doppler flowmetry combined with rapid local heating. After 6 min at baseline (skin temperature clamped at 33°C), local skin temperature was elevated at a rate of 0.5°C every 5 s up to 42°C to elicit a sensory axon response and then held constant for 30 min to cause a plateau. Skin blood flow was calculated as cutaneous vascular conductance [CVC; in perfusion units/mean arterial blood pressure (APU mmHg−1)] and expressed in raw format and relative to heating at 44°C in normoxia (%CVC44). During hypoxaemia, vasodilatation was greater during the initial peak (raw, Δ0.35 APU mmHg−1, P = 0.09; %CVC44, Δ18%, P = 0.05) and the plateau phase (raw, Δ0.55 APU mmHg−1, P = 0.03; %CVC44, Δ26%, P = 0.02). The rate of rise in cutaneous blood flow during the initial peak was significantly greater during poikilocapnic hypoxia (P <0.01). We observed a negative relationship between oxygen saturation in poikilocapnic hypoxia and the change in baseline (P = 0.06), initial peak (P = 0.01) and plateau phase of thermal hyperaemia (P = 0.01). Prolonged poikilocapnic hypoxia causes robust increases in CVC during both phases of thermal hyperaemia that are dependent on the oxygen saturation of the individual.