Understanding the mechanisms of cancer development and metastasis requires comprehensive analyses of interactions between normal and tumor cells and the extracellular matrix (ECM) in hypoxic tumor microenvironments. However, the scope of many tumor microenvironment studies is limited to verifying the development and performance of microenvironment-producing cell culture platforms. This study describes the effects of co-culture and hypoxia on contraction and degradation of the ECM. Collagen type I gel was placed in the gel channel of an oxygen tension-controllable microfluidic device as a tumor tissue substrate. MDA-MB-231 human breast cancer cells and/or human umbilical vein endothelial cells (HUVECs) were cultured inside the gel or on the adjacent media channels, respectively. Changes in the collagen gel were evaluated by generating normoxic (21% O2) or hypoxic (1% O2) conditions via variation of the supply of gas mixture. HUVECs induced collagen gel contraction and degradation more strongly than MDA-MB-231 cells. Although interaction between co-cultured MDA-MB-231 cells and HUVECs promoted gel contraction and degradation, hypoxia attenuated the effect. Immunofluorescence staining indicated decreased expression of secretory matrix metalloproteinase-7 (MMP-7) inside the collagen gel under hypoxic conditions, but no morphologic changes in cells were observed. Separate Western blot analyses using cells cultured on cell culture dishes confirmed reduced endogenous MMP expression in hypoxia-exposed HUVECs. These results demonstrate that hypoxic conditions affect collagen gel contraction and degradation by altering the expression of MMP-7 in co-cultured MDA-MB-231 cells and HUVECs.