Using wide spectral range in situ spectroscopic ellipsometry with systematic ultra high vacuum annealing and in situ exposure to oxygen, we report the complex dielectric function of MoS$_2$ isolating the environmental effects and revealing the crucial role of unpassivated and passivated sulphur vacancies. The spectral weights of the A ($1.92$ eV) and B ($2.02$ eV) exciton peaks in the dielectric function reduce significantly upon annealing, accompanied by spectral weight transfer in a broad energy range. Interestingly, the original spectral weights are recovered upon controlled oxygen exposure. This tunability of the excitonic effects is likely due to passivation and reemergence of the gap states in the bandstructure during oxygen adsorption and desorption, respectively, as indicated by ab initio density functional theory calculation results. This work unravels and emphasizes the important role of adsorbed oxygen in the optical spectra and many-body interactions of MoS$_2$.
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