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Bone defects are characterized by a hypoxic environment, which affects bone tissue repair. However, the role of hypoxia in the repair of alveolar bone defects remains unclear. Human periodontal ligament stem cells (hPDLSCs) are high‐quality seed cells for repairing alveolar bone defects, whose behavior changes under hypoxia. However, their mechanism of action is not known and needs to be elucidated. We hypothesized that hypoxia might be beneficial to alveolar bone defect repair and the osteogenic differentiation of hPDLSCs. To test this hypothesis, cobalt chloride (CoCl2) was used to create a hypoxic environment, both in vitro and in vivo. In vitro study, the best osteogenic effect was observed after 48 h of hypoxia in hPDLSCs, and the AKT/mammalian target of rapamycin/eukaryotic translation initiation factor 4e‐binding protein 1 (AKT/mTOR/4EBP‐1) signaling pathway was significantly upregulated. Inhibition of the AKT/mTOR/4EBP‐1 signaling pathway decreased the osteogenic ability of hPDLSCs under hypoxia and hypoxia‐inducible factor 1 alpha (HIF‐1α) expression. The inhibition of HIF‐1α also decreased the osteogenic capacity of hPDLSCs under hypoxia without significantly affecting the level of phosphorylation of AKT/mTOR/4EBP‐1. In vitro study, Micro‐CT and tissue staining results show better bone regeneration in hypoxic group than control group. These results suggested that hypoxia promoted alveolar bone defect repair and osteogenic differentiation of hPDLSCs, probably through AKT/mTOR/4EBP‐1/HIF‐1α signaling. These findings provided important insights into the regulatory mechanism of hypoxia in hPDLSCs and elucidated the effect of hypoxia on the healing of alveolar bone defects. This study highlighted the importance of physiological oxygen conditions for tissue engineering. [ABSTRACT FROM AUTHOR]