Modulating physical and chemical properties of two-dimensional (2D) transition metal dichalcogenides (TMDCs) by defect engineering induced by oxygen plasma is actively pursued. In this work, exfoliated 2D MoS2 layers treated by medium power oxygen plasma for different times (0, 10, 20, 40, and 60 s) are investigated using Kelvin probe force microscopy and tip-enhanced Raman spectroscopy (TERS) besides micro-Raman and photoluminescence (PL) spectroscopy. Under oxygen plasma, defects (mono- and di-sulfur vacancies) and chemical oxidation are predominant from 0 (native defects) up to 40 s, while etching becomes dominant beyond 40 s for mono- (1L), bi- (2L), and tri- (3L) layer MoS2 with optimal defect density for four- (4L) and more layers. While Raman spectra exhibited lattice distortion (broadening of phonon bands) and surface oxidation by the presence of sub-stoichiometric molytrioxide MoO3 (i.e., MoO3–x or MoSxO2–x), the increased spectral weight of trions and quenching in PL spectra are observed with treatment time. The localized nanodomains (∼20–40 nm) and aggregated vacancies as nanovoids and intermixed MoS2/MoO3–x alloy are identified in near-field Raman spectra. The atomic force microscopy also showed defects aggregation, and Kelvin probe force microscopy revealed the work function (WF) increase from 4.98 to 5.56 eV, corroborating the existence of MoO3–x phase which enables doping and shift Fermi level. We also highlight the unique interaction between the gold substrate and the formed MoO3–x facilitating Mo6+ cation reduction to lower oxidation (i.e., Mo4+), thereby yielding intermediate oxidation states responsible for lower WF (ca. theoretical 6.3 eV for stoichiometric MoO3). Strong correlations among the work function and vibrational and optical responses are established while exploring the oxygen plasma-induced defects and changing the landscape on oxygen doping at the nanoscale with varying MoS2 layers, which are useful for heterogeneous electrocatalysis and applicable to other 2D-TMDCs.