Brains organize behavior and physiology to optimize the response to threats or opportunities. We dissect how 21% O2, an indicator of surface exposure, reprograms C. elegans' global state, inducing sustained locomotory arousal and altering expression of neuropeptides, metabolic enzymes, and other non-neural genes. The URX O2-sensing neurons drive arousal at 21% O2 by tonically activating the RMG interneurons. Stimulating RMG is sufficient to switch behavioral state. Ablating the ASH, ADL, or ASK sensory neurons connected to RMG by gap junctions does not disrupt arousal. However, disrupting cation currents in these neurons curtails RMG neurosecretion and arousal. RMG signals high O2 by peptidergic secretion. Neuropeptide reporters reveal neural circuit state, as neurosecretion stimulates neuropeptide expression. Neural imaging in unrestrained animals shows that URX and RMG encode O2 concentration rather than behavior, while the activity of downstream interneurons such as AVB and AIY reflect both O2 levels and the behavior being executed.