By creating defects via oxygen plasma treatment, we demonstrate optical properties variation of single-layer MoS2. We found that, with increasing plasma exposure time, the photoluminescence (PL) evolves from very high intensity to complete quenching, accompanied by gradual reduction and broadening of MoS2 Raman modes, indicative of distortion of the MoS2 lattice after oxygen bombardment. X-ray photoelectron spectroscopy study shows the appearance of Mo6+ peak, suggesting the creation of MoO3 disordered regions in the MoS2 flake. Finally, using band structure calculations, we demonstrate that the creation of MoO3 disordered domains upon exposure to oxygen plasma leads to a direct to indirect bandgap transition in single-layer MoS2, which explains the observed PL quenching.