Hypoxia is a prominent feature of many severe diseases such as malignant tumors, ischemic strokes, and rheumatoid arthritis. The lack of oxygen has a paramount impact on angiogenesis, invasion, metastasis, and chemotherapy resistance. The potential of hypoxia as a therapeutic target has been increasingly recognized over the last decade. In order to treat these disease states, peptides have been extensively investigated due to their advantages in safety, target specificity, and tumor penetrability. Peptides can overcome difficulties such as low drug/energy delivery efficiency, hypoxia-induced drug resistance, and tumor nonspecificity. There are three main strategies for targeting hypoxia through peptide-based nanomaterials: (i) using peptide ligands to target cellular environments unique to hypoxic conditions, such as cell surface receptors that are upregulated in cells under hypoxic conditions, (ii) utilizing peptide linkers sensitive to the hypoxic microenvironment that can be cleaved to release therapeutic or diagnostic payloads, and (iii) a combination of the above where targeting peptides will localize the system to a hypoxic environment for it to be selectively cleaved to release its payload, forming a dual-targeting system. This review focuses on recent developments in the design and construction of novel peptide-based hypoxia-targeting nanomaterials, followed by their mechanisms and potential applications in diagnosis and treatment of hypoxic diseases. In addition, we address challenges and prospects of how peptide-based hypoxia-targeting nanomaterials can achieve a wider range of clinical applications.