The significant effects of annealing atmosphere on the thermal reduction of graphene oxide (GO) under different atmospheres, air and nitrogen, have been investigated and their distinct properties shown. Initially thermal annealing of both GO in air and nitrogen leads to elimination of unstable in-plane oxygen containing groups. For GO in air (A-RGO), as the temperature is raised to about 400 °C, oxygen starts to react with carbon atoms along the sheet and defect edges, where carbon atoms are most active, leading to the formation of oxygen functional groups which are carboxyl and epoxide as observed using the infrared absorption and X-ray photoelectron measurements. Raman results also show an increase in the amount of hybridized sp³ carbons and defects in agreement with an increase in the oxygen functional groups. In contrast, thermal reduction of GO in nitrogen (N-RGO) leads mainly to the loss of oxygen functional groups, the decrease in the amount of sp³ carbons, and the increase in the C/O ratio compared to those of A-RGO. The resulting A-RGO and N-RGO possess also very different ion affinities, for instance, A-RGO annealed at 500 °C shows much higher cation sorption capacity compared to that of the N-RGO. Divergent transformation paths between GO undergoing thermal reduction in air and N2 are proposed based on these results.