Background: The obstructive sleep apnoea/hypopnoea syndrome (OSAHS) is associated with hypertension and increased cardiovascular risk, particularly when accompanied by marked nocturnal hypoxaemia. The mechanisms of these associations are unclear. We hypothesised that OSAHS combined with severe nocturnal hypoxaemia causes impaired vascular function that can be reversed by continuous positive airways pressure (CPAP) therapy. Methods: We compared vascular function in two groups of patients with OSAHS: 27 with more than 20 4% desaturations/h (desaturator group) and 19 with no 4% and less than five 3% desaturations/h (non-desaturator group). In a randomised, double blind, placebo controlled, crossover trial, the effect of 6 weeks of CPAP therapy on vascular function was determined in the desaturator group. In all studies, vascular function was assessed invasively by forearm venous occlusion plethysmography during intra-arterial infusion of endothelium dependent (acetylcholine 5–20 μg/min and substance P 2–8 pmol/min) and independent (sodium nitroprusside 2–8 μg/min) vasodilators. Results: Compared with the non-desaturator group, patients with OSAHS and desaturations had reduced vasodilatation to all agonists (p = 0.007 for all). The apnoea/hypopnoea index and desaturation frequency were inversely related to peak vasodilatation with acetylcholine (r = −0.44, p = 0.002 and r = −0.43, p = 0.003) and sodium nitroprusside (r = −0.42, p = 0.009 and r = −0.37, p = 0.02). In comparison with placebo, CPAP therapy improved forearm blood flow to all vasodilators (p = 0.01). Conclusions: Patients with OSAHS and frequent nocturnal desaturations have impaired endothelial dependent and endothelial independent vasodilatation that is proportional to hypoxaemia and is improved by CPAP therapy. Impaired vascular function establishes an underlying mechanism for the adverse cardiovascular consequences of OSAHS.