In recent years, biomass oxy-fuel gasification has prompted increased interest for its ability to produce a gas with low tar content and to assist in carbon reduction. It is noteworthy that the type of atmosphere is a crucial factor influencing the devolatilization process in biomass gasification and the specific mechanisms by which an oxy-fuel atmosphere influences the devolatilization process remain inadequately explored. This work aimed to investigate the effect of various reaction atmospheres on devolatilization behavior, reaction kinetics, intermediate product formation, and biochar functional groups (BFGs) evolution. In comparison to an inert atmosphere, the oxy-fuel atmosphere facilitated the release of volatiles, and enhanced energy self-sustainability within the devolatilization system. The presence of O2 and CO2 promoted the generation of potential anhydrosugars while suppressing the formation of phenolic compounds. The synergistic effect present in the oxy-fuel atmosphere augments the exothermic effect and promotes the release of volatile and alkane gases during the devolatilization process. Furthermore, as oxygen concentrations increased in the reaction atmosphere, the sequential response of BFGs primarily followed the order: C-O → aromatic ring → C-OH/C–H/COO– → C=O. Moreover, advanced characterization analyses revealed that the oxy-fuel environment was more effective in promoting the aromatization and pore structure of biochar than an inert atmosphere. Collectively, these findings have substantial implications for reaction modeling in biomass fixed-bed gasification under real gas atmospheres and guide future research on tar control strategies.