Absence of oxygen in space?

Good question.

The idea could possibly work in principle, except that an enormous amount of smoke would have to be released in order to be effective in any way. That means you would have to carry about a massive amount of materials needed to produce the smoke.

Think of the nucleus of a comet. It releases vast clouds of dust, steam, and other effluvience, which as seen from Earth make the nucleus itself a bit hard to see because of all the sunlight reflected from the cloud that surrounds it.

Various chemical reactions are very effective at producing smoke, and such a process could be used to make it difficult to pinpoint your vessel. However, the big cloud of smoke would itself attract a lot of attention as it would appear as a big fuzzy nebula that would reflect a lot of sunlight. Once attention had been focused on the odd nebula, radar would soon detect the vessel causing it.

Perhaps your best means of camouflage in space would be a big swarm of decoys, which would consist of aluminised inflated plastic replicas of your vessel. It would take your adversary some time to work out which of the many radar blips was your actual vessel, during which time you could ideally organise a diplomatic solution to the issues upsetting your adversary, and communicate it to them to start negotiations.

What's the point? Smoke screen was effective in naval warfare until World War 2 when ships started to get equipped with radar.  

Any ship involved in space combat will likely to have radar which is not affected by a smoke.  Even if it was possible to make a smoke screen in space, it would only attract attention if the ship just sits in the smoke.  If it moves, it will become visible again.

Once in space, if a spacecraft emitted smoke, the smoke would very swiftly dissipate, so it's use as camouflage would be zero.

And, if the smoke didn't immediately dissipate, then the enemy ship would have a clear target, that being shoot at the smoke, as there is NO natural smoke in space.

Thus, this would 100% not work, not even for a tenth of a second.

Modern rockets usually use liquid fuels which react with liquid Oxygen to produce a hot gaseous exhaust. The WW2 German V-2 rocket employed ethanol as fuel. NASA has used liquid Hydrogen, kerosene, methane, and hydrazine as liquid fuels in the past. None of these liquid fuels produce smoke, but they do produce a great deal of steam. But NASA also uses "solid rocket boosters", which do produce a great deal of smoke as they burn. 

Interestingly, Science Fiction writer Arthur C. Clark proposed that a rocket could be powered by electrostatically accelerating huge amounts of dust particles to obtain thrust, which could almost count as smoke. And Silane (SiH4) has been proposed to fuel jet aircraft in the atmospheres of Mars and Venus, using CO2 as the oxidizer. The reaction is SiH4 + 2CO2-->SiO2 + 2H2O + 2C, with the SiO2 being white smoke and the C being black smoke, winding up as gray smoke, I guess. 

Very interesting.

That would not work in space.

You could release an opaque gas but it will dissipate at a greater speed because of the lack of air pressure to contain it. 

There would be no smoke; you may see the light of the igniting fuel/oxidizer, but the resulting particles would scatter very quickly & become virtually invisible. 

If you're writing about spacecraft, then usually you're dealing with fairly high speeds and large distances, so providing *visual* camouflage likely wouldn't be necessary... If a spacecraft is trying to 'hide' in space (or near a planet), then I'd bet whoever is looking for them would be using radar (so, chaff might provide a better means of camo in that event), or searching via infrared (a spacecraft will usually be hotter than the space behind it... in that case, keeping the sun in the eyes of the people looking for you would be an effective way to hide...

Rockets release smoke and steam in our atmosphere.  In space, there is no visible exhaust so releasing smoke as camouflage would be a bit far-fetched.

They could release gas (such as oxygen or nitrogen) that forms a fog.

At the start of the launch, there is a great deal of "smoke" released, which is not really smoke at all. However, shortly after, there is none at all, just the heat of the rockets. 

If you want your rocket ship to release a smoke screen, then you have to have it equipped with smoke generators, like naval ships have, or look up how planes at airshows generate smoke.

However, releasing a smoke screen in space would really only pinpoint the position and direction of the craft rather than camouflage it.

smoke is a suspension of black particles, soot, in the air. 

there is no air in space, so smoke could not exist. 

Oxygen has nothing to do with it.