Global observations show that the ocean lost approximately 2% of its oxygen inventory over the past five decades, with important implications for marine ecosystems. The rate of change varies regionally, with northwest Atlantic coastal waters showing a long-term drop that vastly outpaces the global and North Atlantic basin mean deoxygenation rates. However, past work has been unable to differentiate the role of large-scale climate forcing from that of local processes. Here, we use hydrographic evidence to show that a Labrador Current retreat is playing a key role in the deoxygenation on the northwest Atlantic shelf. A high-resolution global coupled climate–biogeochemistry model reproduces the observed decline of saturation oxygen concentrations in the region, driven by a retreat of the equatorward-flowing Labrador Current and an associated shift towards more oxygen-poor subtropical waters on the shelf. The dynamical changes underlying the shift in shelf water properties are correlated with a slowdown in the simulated Atlantic Meridional Overturning Circulation (AMOC). Our results provide strong evidence that a major, centennial-scale change of the Labrador Current is underway, and highlight the potential for ocean dynamics to impact coastal deoxygenation over the coming century.