The creation of innovative ultrasound contrast agents (UCAs) with the ability to monitor oxygen levels in real-time holds immense potential for advancing early diagnosis of various medical conditions such as hypoxic/reperfusion injury. In this study, we propose the development of oxygen sensitive UCAs using microbubbles composed of hemoglobin (HbMBs), which can function as sensors for blood oxygen levels. Previously, we performed a study highlighting the initial proof-of-concept efficacy of air-filled HbMBs in detecting oxygenation changes in vitro, offering a promising tool for clinically detecting tissue hypoxia. Nevertheless, a significant drawback of this approach is the potential for immune reactions and toxicity when hemoglobin is outside its natural red blood cell environment. Moreover, in vitro, HbMBs had low stability, with more than 90% decrease in their concentration after 120 minutes. Therefore, careful consideration of the surface properties and the gas core of HbMBs is crucial. Here, we formulated PEGylated HbMBs (PHbMBs), and investigated their stability, immunogenicity, and their acoustic response in oxygenated and deoxygenated media in vitro. We optimized PEGylated HbMBs (PHbMBs), showing a 42% reduction in immunogenicity and significantly improved stability in vitro, while maintaining their oxygen-binding and acoustic response. In vivo, PHbMBs demonstrated similar contrast enhancement to that of non-PEGylated MBs, demonstrating that PEGylation does not decrease HbMBs' acoustic signaling. Finally, changing the gas core from air to PFB increased PHbMBs' mean circulation time more than 11-fold, without diminishing their responsiveness to oxygen. Overall, the proposed oxygen sensitive PHbMBs offer a promising avenue for real-time acoustic detection of blood oxygen levels, paving the way for potential clinical applications in monitoring critically ill patients. STATEMENT OF SIGNIFICANCE: This research explores the emergent field of Acoustic Oxygen Imaging in vivo using hemoglobin-based microbubbles. This innovative contrast agent approach involves imaging using crosslinked biomaterial comprised of the hemoglobin protein, aiming to transform the way we monitor blood oxygen levels with ultrasound. This work fundamentally addresses central concerns of improving bubble stability and circulation life for eventual clinical use, while minimizing toxicity. Importantly, we demonstrate that PEGylation of hemoglobin microbubbles enhances their stability, reduces immunogenicity, and maintains acoustic responsiveness. The incorporation of perfluorobutane into the bubble core increases the longevity of these microbubbles in circulation, while sustaining their oxygen sensitivity. Favorable in vivo results highlight the potential of this technology in real-time acoustic detection of blood oxygen levels.