Elderly adults demonstrate increased propensity for breathing instability during sleep compared with younger adults, and this may contribute to increased prevalence of sleep-disordered breathing (SDB) in this population. Hence, in older adults with SDB, we examined whether addition of supplemental oxygen (O2) will stabilize breathing during sleep and alleviate SDB. We hypothesized that exposure to supplemental O2 during non-rapid eye movement (NREM) sleep will stabilize breathing and will alleviate SDB by reducing ventilatory chemoresponsiveness and by widening the carbon dioxide (CO2) reserve. We studied 10 older adults with mild-to-moderate SDB who were randomized to undergo noninvasive bilevel mechanical ventilation with exposure to room air or supplemental O2 (Oxy) to determine the CO2 reserve, apneic threshold (AT), and controller and plant gains. Supplemental O2 was introduced during sleep to achieve a steady-state O2 saturation ≥95% and fraction of inspired O2 at 40%–50%. The CO2 reserve increased significantly during Oxy versus room air (−4.2 ± 0.5 mmHg vs. −3.2 ± 0.5 mmHg, P = 0.03). Compared with room air, Oxy was associated with a significant decline in the controller gain (1.9 ± 0.4 L/min/mmHg vs. 2.5 ± 0.5 L/min/mmHg, P = 0.04), with reductions in the apnea-hypopnea index (11.8 ± 2.0/h vs. 24.4 ± 5.6/h, P = 0.006) and central apnea-hypopnea index (1.7 ± 0.6/h vs. 6.9 ± 3.9/h, P = 0.03). The AT and plant gain were unchanged. Thus, a reduced slope of CO2 response resulted in an increased CO2 reserve. In conclusion, supplemental O2 reduced SDB in older adults during NREM sleep via reduction in chemoresponsiveness and central respiratory events. NEW & NOTEWORTHY This study demonstrates for the first time in elderly adults without heart disease that intervention with supplemental oxygen in the clinical range will ameliorate central apneas and hypopneas by decreasing the propensity to central apnea through decreased chemoreflex sensitivity, even in the absence of a reduction in the plant gain. Thus, the study provides physiological evidence for use of supplemental oxygen as therapy for mild-to-moderate SDB in this vulnerable population.