Key points The ventilatory response to reduced oxygen (hypoxia) is biphasic, comprising an initial increase in ventilation followed by a secondary depression. Our findings indicate that, during hypoxia, astrocytes in the pre‐Bötzinger complex (preBötC), a critical site of inspiratory rhythm generation, release a gliotransmitter that acts via P2Y1 receptors to stimulate ventilation and reduce the secondary depression. In vitro analyses reveal that ATP excitation of the preBötC involves P2Y1 receptor‐mediated release of Ca2+ from intracellular stores. By identifying a role for gliotransmission and the sites, P2 receptor subtype, and signalling mechanisms via which ATP modulates breathing during hypoxia, these data advance our understanding of the mechanisms underlying the hypoxic ventilatory response and highlight the significance of purinergic signalling and gliotransmission in homeostatic control. Clinically, these findings are relevant to conditions in which hypoxia and respiratory depression are implicated, including apnoea of prematurity, sleep disordered breathing and congestive heart failure. Abstract The hypoxic ventilatory response (HVR) is biphasic, consisting of a phase I increase in ventilation followed by a secondary depression (to a steady‐state phase II) that can be life‐threatening in premature infants who suffer from frequent apnoeas and respiratory depression. ATP released in the ventrolateral medulla oblongata during hypoxia attenuates the secondary depression. We explored a working hypothesis that vesicular release of ATP by astrocytes in the pre‐Bötzinger Complex (preBötC) inspiratory rhythm‐generating network acts via P2Y1 receptors to mediate this effect. Blockade of vesicular exocytosis in preBötC astrocytes bilaterally (using an adenoviral vector to specifically express tetanus toxin light chain in astrocytes) reduced the HVR in anaesthetized rats, indicating that exocytotic release of a gliotransmitter within the preBötC contributes to the hypoxia‐induced increases in ventilation. Unilateral blockade of P2Y1 receptors in the preBötC via local antagonist injection enhanced the secondary respiratory depression, suggesting that a significant component of the phase II increase in ventilation is mediated by ATP acting at P2Y1 receptors. In vitro responses of the preBötC inspiratory network, preBötC inspiratory neurons and cultured preBötC glia to purinergic agents demonstrated that the P2Y1 receptor‐mediated increase in fictive inspiratory frequency involves Ca2+ recruitment from intracellular stores leading to increases in intracellular Ca2+ ([Ca2+]i) in inspiratory neurons and glia. These data suggest that ATP is released by preBötC astrocytes during hypoxia and acts via P2Y1 receptors on inspiratory neurons (and/or glia) to evoke Ca2+ release from intracellular stores and an increase in ventilation that counteracts the hypoxic respiratory depression.