Offspring fitness generally improves with increasing egg size. Yet, eggs of most aquatic organisms are small. A common but largely untested assumption is that larger embryos require more oxygen than they can acquire through diffusion via the egg surface, constraining egg size evolution. However, we found no detrimental effects of large egg size on embryo growth and survival under hypoxic conditions. We tested this in the broad-nosed pipefish, Syngnathus typhle, whose males provide extensive care (nourishment, osmoregulation and oxygenation) to their young in a brood pouch on their bodies. We took advantage of this species' pronounced variation in egg size, correlating positively with female size, and tested the effect of hypoxia (40% dissolved oxygen) versus fully oxygenated (100%) water on embryo size and survival of large versus small eggs after 18 days of paternal brooding. Egg size did not affect embryo survival, regardless of O2 treatment. While hypoxia affected embryo size negatively, both large and small eggs showed similar reductions in growth. Males in hypoxia ventilated more and males with large eggs swam more, but neither treatment affected their position in the water column. Overall, our results call into question the most common explanation for constrained egg size evolution in aquatic environments.