The Louisiana shelf, in the northern Gulf of Mexico, receives large amounts of freshwater and nutrients from the Mississippi–Atchafalaya river system. These river inputs contribute to widespread bottom-water hypoxia every summer. In this study, we use a physical–biogeochemical model that explicitly simulates oxygen sources and sinks on the Louisiana shelf to identify the key mechanisms controlling hypoxia development. First, we validate the model simulation against observed dissolved oxygen concentrations, primary production, water column respiration, and sediment oxygen consumption. In the model simulation, heterotrophy is prevalent in shelf waters throughout the year, except near the mouths of the Mississippi and Atchafalaya rivers, where primary production exceeds respiratory oxygen consumption during June and July. During this time, efflux of oxygen to the atmosphere, driven by photosynthesis and surface warming, becomes a significant oxygen sink. A substantial fraction of primary production occurs below the pycnocline in summer. We investigate whether this primary production below the pycnocline is mitigating the development of hypoxic conditions with the help of a sensitivity experiment where we disable biological processes in the water column (i.e., primary production and water column respiration). With this experiment we show that below-pycnocline primary production reduces the spatial extent of hypoxic bottom waters only slightly. Our results suggest that the combination of physical processes (advection and vertical diffusion) and sediment oxygen consumption largely determine the spatial extent and dynamics of hypoxia on the Louisiana shelf.