SARS-CoV-2 uptake by lung epithelial cells is a critical step in the pathogenesis of COVID-19. Viral entry is dependent on the binding of the viral spike protein to the angiotensin converting enzyme II protein (ACE2) on the host cell surface, followed by proteolytic cleavage by a host serine protease such as TMPRSS2. Infection of alveolar epithelial cells (AEC) in the distal lung is a key feature in progression to the acute respiratory distress syndrome (ARDS). We hypothesized that AEC expression of ACE2 is induced by hypoxia. In a murine model of hypoxic stress (12% FiO2), the total lung Ace2 mRNA and protein expression was significantly increased after 24 hours in hypoxia compared to normoxia (21% FiO2). In experiments with primary murine type II AEC, we found that exposure to hypoxia either in vivo (prior to isolation) or in vitro resulted in greatly increased AEC expression of both Ace2 (mRNA and protein) and of Tmprss2. However, when isolated type II AEC were maintained in culture over 5 days, with loss of type II cell characteristics and induction of type I cell features, Ace2 expression was greatly reduced, suggesting that this expression was a feature of only this subset of AEC. Finally, in primary human small airway epithelial cells (SAEC), ACE2 mRNA and protein expression were also induced by hypoxia, as was binding to purified spike protein. Hypoxia-induced increase in ACE2 expression in type II AEC may provide an explanation of the extended temporal course of human patients who develop ARDS in COVID-19.