Two-dimensional molybdenum disulfide (MoS2) is a semiconductor that could be used to build scaled transistors and other advanced electronic and optoelectronic devices. However, the material typically exhibits strong n-type doping, low photoluminescence quantum yields and high contact resistance with metals, behaviour that is often attributed to the presence of donor states induced by sulfur vacancies. Here we show that oxygen-incorporated chemical vapour deposition can be used to passivate sulfur vacancies and suppress the formation of donor states in monolayer MoS2. First-principles calculations and spectroscopy measurements are used to reveal the formation of molybdenum–oxygen bonding at the sulfur vacancy sites and the absence of donor states in oxygen-incorporated MoS2. Compared with MoS2 fabricated via chemical vapour deposition without oxygen, oxygen-incorporated MoS2 exhibits enhanced photoluminescence, higher work function and improved contact resistance with a lower Schottky barrier (less than 40 meV) at the metal/MoS2 interface. Sulfur vacancies in monolayer molybdenum disulfide can be passivated using an oxygen-incorporated chemical vapour deposition technique, which results in less n-type doping, enhanced photoluminescence and decreased contact resistance compared with growth without oxygen.