The present study was undertaken to evaluate the individual and combined effects of oxygen concentration and diet composition on the growth, nutrient utilization and intestinal morphology of Nile tilapia (Oreochromis niloticus). Two recirculating aquaculture systems were used to create the difference in oxygen concentration: normoxia (6.9 mg·L− 1) and hypoxia (3.5 mg·L− 1). Two diets were formulated using a different soybean meal (SBM) content to create a contrast in the potential to affect the gut barrier function. Triplicate groups of 35 fish with initial mean body weight of 23 g were fed “Control” diet containing 20% fish meal and “Test” diet containing only plant protein source at normoxia and hypoxia for 8 weeks. Six fish per treatment were sampled for intestinal morphological analysis at the end of week 1, 4 and 8. The proximal, middle and distal intestine were processed for quantitative histology, in order to count goblet cells (GC) and eosinophilic granulocytes (EG); and to measure the thickness of lamina propria (LP) and sub-epithelial mucosa (SM). The study showed that growth was best in the “Control” diet under normoxia, while no interaction between oxygen and diet composition was found. Hypoxia reduced nutrient digestibility significantly (p < 0.05). For the “Test” diet, the decline in digestibility was larger than for “Control” diet over time. Both diet composition and oxygen level induced changes in intestinal morphology of Nile tilapia. We observed a thickening of the LP and SM caused by an increased infiltration of inflammatory cells, and an increased number of GC and EG among the enterocytes. The negative effect of increased soybean meal on intestinal morphology was enhanced at low oxygen level and aggravated in time. The SBM enteritis-like symptoms were more pronounced in the proximal than in the distal intestine of Nile tilapia.