Concerns are being raised that patients receiving oxygen treatment are being put at unnecessary risk because of poor monitoring and faulty equipment.
The National Patient Safety Agency has given hospitals in England and Wales until the end of March to improve.
The watchdog said it was acting after receiving reports of people dying and being seriously harmed due to problems.
Experts said despite over 2m people getting oxygen treatment each year, it was still not being prioritised enough.
The therapy is given to a range of patients, including people with lung problems, trauma patients and those struggling with serious infections.
The NPSA acted after a voluntary reporting scheme flagged up a "substantial" number of mistakes.
The watchdog had been alerted to almost 300 incidents, including 44 deaths, where mistakes had been made over the past five years.
But officials said the true figure was likely to be much higher, as not all cases would have been reported under the scheme.
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