Purpose Both cognitive motor dual-tasks (CMDT) protocols and hypoxic environments have been associated with significant impairments in cognitive and physical performance. We aimed to determine the effects of hypoxia on cognitive performance and neuromuscular fatigue during a highly physically demanding CMDT. Methods Fifteen young adults completed a first session involving a cognitive task (CTLCOG) followed by cycling exercise (CTLEX) in normoxia. After that, they randomly participated in CMDT sessions in normoxia (DTNOR) and hypoxia (DTHYP). The physical exercise consisted of 20 min cycling at a “hard” perceived effort, and the cognitive task consisted of 15 min sustained attention to response time task (SART). Concurrent psycho-physiological measurements included: quadriceps neuromuscular fatigue (peripheral/central components from femoral nerve electrostimulation), prefrontal cortex (PFC) oxygenation by near-infrared spectroscopy, and perception of effort. Results SART performance significantly decreased in DTNOR (-15.7 ± 15.6%, P textless 0.01) and DTHYP (-26.2 ± 16.0%, P textless 0.01) compared to CTLCOG (-1.0 ± 17.7%, P = 0.61). Peripheral fatigue similarly increased across conditions, whereas the ability of the central nervous system to activate the working muscles was impaired similarly in DTNOR (-6.1 ± 5.9%, P textless 0.001) and DTHYP (-5.4 ± 7.3%, P textless 0.001) compared to CTLEX (-1.1 ± 0.2%, P = 0.52). Exercise-induced perception of effort was higher in DTHYP vs. DTNOR and in DTNOR vs. CTLEX. This was correlated with cognitive impairments in both normoxia and hypoxia. PFC deoxygenation was more pronounced in DTHYP compared to DTNOR and CTLEX. Conclusion In conclusion, performing a sustained attention task together with physically challenging cycling exercise promotes central neuromuscular fatigue and impairs cognitive accuracy; the latter is particularly noticeable when the CMDT is performed in hypoxia.