Despite extensive studies of the development and dynamics of hypoxia in coastal oceans, factors controlling the decomposition rates and pathways of labile organic matter (OM) in hypoxic waters are not well understood. We investigated peptide decomposition in a stratified water column in the hypoxic region of the northern Gulf of Mexico by conducting on-deck incubation experiments. Our results showed that peptide decomposition efficiency was limited by the availability of soluble reactive phosphorus (Pi) in the surface water (<0.3 µM), as it was greatly enhanced after Pi addition to the incubation water. In contrast, peptide decomposition rate in the subsurface water, enriched with Pi (0.4-1.2 µM), was twice as high as that in the surface water, concomitant with the development of fast-growing bacteria during the incubation. These results indicate that a high level of Pi is crucial in stimulating the growth of bacterial strains with high RNA contents and thus faster OM decomposition, a positive feedback on hypoxia formation in Pi-enriched coastal subsurface waters. These results also offer insights into organic matter decomposition mechanism in deep open ocean enriched with nutrients.