Distal arterioles with limited smooth muscles help maintain the high blood flow and low pressure in the lung circulation. Chronic hypoxia induces lung distal vessel muscularization. However, the molecular events that trigger alveolar hypoxia-induced peripheral endothelium modulation of vessel wall smooth muscle cell (SMC) proliferation and filling of nonmuscular areas are unclear. Here, we investigated the role of CX3CL1/CX3CR1 system in endothelial-SMC cross talk in response to hypoxia. Human lung microvascular endothelial cells responded to alveolar oxygen deficiency by overproduction of the chemokine CX3CL1. The CX3CL1 receptor CX3CR1 is expressed by SMCs that are adjacent to the distal endothelium. Hypoxic release of endothelial CX3CL1 induced SMC phenotypic switching from the contractile to the proliferative state. Inhibition of CX3CR1 prevented CX3CL1 stimulation of SMC proliferation and monolayer expansion. Furthermore, CX3CR1 deficiency attenuated spiral muscle expansion, distal vessel muscularization, and pressure elevation in response to hypoxia. Our findings indicate that the capillary endothelium relies on the CX3CL1-CX3CR1 axis to sense alveolar hypoxia and promote peripheral vessel muscularization. These results have clinical significance in the development of novel therapeutics that target mechanisms of distal arterial remodeling associated with pulmonary hypertension induced by oxygen deficiency that is present in people living at high altitudes and patients with obstructive lung diseases.