Drosophila hemocytes are akin to mammalian myeloid blood cells that function in stress and innate immune-related responses. A multi-potent progenitor population responds to local signals and to systemic stress by expanding the number of functional blood cells. Here we show mechanisms that demonstrate an integration of environmental carbon dioxide (CO2) and oxygen (O2) inputs that initiate a cascade of signaling events, involving multiple organs, as a stress response when the levels of these two important respiratory gases fall below a threshold. The CO2 and hypoxia-sensing neurons interact at the synaptic level in the brain sending a systemic signal via the fat body to modulate differentiation of a specific class of immune cells. Our findings establish a link between environmental gas sensation and myeloid cell development in Drosophila. A similar relationship exists in humans, but the underlying mechanisms remain to be established.