Psychological symptom improvement has been observed after continuous positive airway pressure (CPAP) treatment of obstructive sleep apnea (OSA). Because CPAP normalizes both sleep disruption and oxyhemoglobin desaturation, the mechanism of psychological symptom improvement is unclear. Using a 3-arm placebo-controlled design, we parsed out the separate effects of treatment on psychological symptoms. OSA patients (N = 38) were monitored 2 nights with polysomnography and then randomized to 2-weeks therapeutic CPAP, placebo CPAP, or O2 supplementation. Preand post-treatment, patients completed the Brief Symptom Inventory (BSI): Higher scores indicate greater severity. Repeated measures analysis of covariance reveals a Time × Treatment interaction for BSI Global Severity Index (GSI): significant pre- to post-treatment reductions in GSI with O2 supplementation and therapeutic CPAP, but not placebo CPAP. A Time × Treatment interaction was also found for depression: Depression decreased with O2 supplementation but not with therapeutic CPAP or placebo CPAP. Both therapeutic CPAP and O2 supplementation resulted in decreased psychological symptoms. Results suggest hypoxemia may play a stronger role than sleep disruption vis-à-vis OSA related psychological distress.