Here, we demonstrate a high-mobility indium oxide (In2O3) thin-film transistor (TFT) with a sputtered alumina (Al2O3) passivation layer (PVL) with a low thermal budget (200 °C). The sputtering process of the Al2O3 PVL plays a positive role in improving the field-effect mobility (µ FE) and current on/off ratio (I ON/I OFF) performance of the In2O3 TFTs. However, these enhancements are limited due to the high density of intrinsic trap defects in the In2O3 channels, as reflected in their large hysteresis and poor bias stability. Treating the In2O3 channel with oxygen (O2) plasma prior to sputtering the Al2O3 PVL results in notable improvements. Specifically, a high µ FE of 128.3 cm2V−1 s−1, a high I ON/I OFF over 106 at V DS of 0.1 V, a small hysteresis of 0.03 V, and a negligible threshold voltage shift under negative bias stress are achieved in the passivated In2O3 TFT (with O2 plasma pretreatment), representing a significant improvement compared to the passivated In2O3 TFT (without O2 plasma pretreatment) and the unpassivated In2O3 TFT. The remarkable reduction of intrinsic trap defects in the passivated In2O3 TFT compensated by O2 plasma is the primary mechanism underlying the improvement in µ FE and bias stability, as validated by x-ray photoelectron spectra, hysteresis analysis, and temperature-stress electrical characterizations. Plasma treatment effectively compensates for intrinsic trap defects in oxide semiconductor (OS) channels, when combined with sputter passivation, resulting in a significant enhancement of the overall performance of OS TFTs under low thermal budgets. This approach offers valuable insights into advancing OS TFTs with satisfactory driving capability and wide applicability.