The present work develops an atomic layer reduction (ALR) method to accurately tune oxidation level, electrical conductance, band-gap structure, and photoluminescence (PL) response of graphene oxide (GO) sheets. The ALR route is carried out at 200 °C within ALR cycle number of 10–100. The ALR treatment is capable of striping surface functionalities (e.g., hydroxyl, carbonyl, and carboxylic groups), producing thermally-reduced GO sheets. The ALR cycle number serves as a controlling factor in adjusting the crystalline, surface chemistry, electrical, optical properties of GO sheets. With increasing the ALR cycle number, ALR-GO sheets display a high crystallinity, a low oxidation level, an improved electrical conductivity, a narrow band gap, and a tunable PL response. On the basis of the results, the ALR technique offers a great potential for accurately tune electrical and optical properties of carbon materials through the cyclic removal of oxygen functionalities, without any complicated thermal and chemical desorption processes.