Arterial oxyhemoglobin saturation (SaO2) is considered to be the reference method for evaluating lung function. There is current interest in development of biosensors to measure SpO2 (peripheral oxygen saturation) using infrared technology as a non-invasive alternative for pre-clinical respiratory detection of disease in animals. Objectives of this study were to investigate effects of experimentally-induced hypoxemia on hemodynamics (heart rate, HR and blood pressure, BP) and SaO2, and to evaluate the ability of 2 SpO2 pulse oximeters (PowerLab, AD Instruments; Passport2, Datascope) to predict SaO2 in cattle. Further, arterial lactate concentrations were measured as an indicator of oxygen delivery to tissues. Graded levels of hypoxia in seven anesthetized Holstein steers (BW = 127 ± 7 kg) were achieved by step-wise reductions in inspired oxygen fraction (FiO2) from baseline (20–35%) to target levels of 14–15%, 16–17%, and 18–19%. When the desired FiO2 levels were sustained for at least 3 min, arterial blood samples (n = 56) were collected and analyzed using a co-oximeter (pHOx-Ultra, Nova Biomedical) to determine SaO2 and lactate. Simultaneously, BP, HR and SpO2 data from the 2 pulse oximeters were recorded. Data were analyzed with a mixed model that included level of FiO2 as fixed effect. As expected, SaO2 decreased (P < 0.001) as FiO2 was reduced. Heart rate increased (P < 0.001) as FiO2 was reduced, although BP was unaffected by hypoxia. While not significantly different (P = 0.15), arterial lactate concentrations were reduced with declining FiO2. Likewise, the SpO2 values recorded by both pulse oximeters decreased (P < 0.001) incrementally as FiO2 declined, although values were only moderately correlated (P < 0.01; r = 0.35 to 0.41) with SaO2. These results demonstrate that future efforts to develop biosensors to monitor SpO2 and HR may have utility for preclinical detection of respiratory disease in livestock.