This article reviews the physiological principles underlying the application of assessment of fetal movements and fetal heart rate (FHR) in detecting fetal hypoxia. Studies in both fetal sheep and healthy human fetuses are discussed including those which have demonstrated the importance of appreciating the existence of rest-activity cycles under normal physiological conditions. The role of adenosine in mediating the hypoxic inhibition of fetal breathing movements (FBMs) is reviewed as is the previously unrecognized importance of fetal gasping as a possible new measure of fetal hypoxia.