Natural oxygen gradients occur in tissues of biological organisms and also in the context of three-dimensional (3D) in vitro cultivation. Oxygen diffusion limitation and metabolic oxygen consumption by embedded cells produce areas of hypoxia in the tissue/matrix. However, reliable systems to detect oxygen gradients and cellular response to hypoxia in 3D cell culture systems are still missing. In this study, we developed a system for visualization of oxygen gradients in 3D using human adipose tissue-derived mesenchymal stem cells (hAD-MSCs) modified to stably express a fluorescent genetically engineered hypoxia sensor HRE-dUnaG. Modified cells retained their stem cell characteristics in terms of proliferation and differentiation capacity. The hypoxia-reporter cells were evaluated by fluorescence microscopy and flow cytometry under variable oxygen levels (2.5%, 5%, and 7.5% O-2). We demonstrated that reporter hAD-MSCs output is sensitive to different oxygen levels and displays fast decay kinetics after reoxygenation. Additionally, the reporter cells were encapsulated in bulk hydrogels with a variable cell number, to investigate the sensor response in model 3D cell culture applications. The use of hypoxia-reporting cells based on MSCs represents a valuable tool for approaching the genuine in vivo cellular microenvironment and will allow a better understanding of the regenerative potential of AD-MSCs.