In this study, we investigated the effects of oxygen content on the transfer characteristics and stability of high-mobility indium-gallium-tin oxide (IGTO) thin-film transistors (TFTs) during channel layer deposition. The IGTO thin films were deposited through direct current sputtering at different ambient oxygen percentages of 10%, 20%, 30%, 40%, and 50%. The experimental results indicate that the drain currents were hardly modulated by the gate-to-source voltage in the IGTO TFT prepared at 10% ambient oxygen. However, as the oxygen content increased from 20% to 50%, the transfer curves shifted to the positive direction with a decrease in field-effect mobility (μFE). The IGTO TFTs exhibited deteriorated positive bias stress (PBS) stability as the oxygen content increased. However, the stabilities of the IGTO TFTs under negative bias illumination stress (NBIS) improved with an increase in the ambient oxygen percentage during the channel layer deposition. Furthermore, to understand the mechanism of the observed phenomena, we performed X-ray photoelectron spectroscopy (XPS) analysis of the IGTO thin films prepared at different oxygen percentages. The XPS results demonstrate that the deteriorated PBS stability and enhanced NBIS stability of the IGTO TFTs prepared at higher oxygen percentages were mainly ascribed to the larger amount of oxygen interstitials resulting from the excess oxygen and the smaller number of oxygen vacancies within the IGTO, respectively. The obtained results suggest that the oxygen percentages of 30% in the sputtering ambient is the most suitable oxygen percentage for optimizing the electrical properties (μFE = 24.2 cm2/V·s, subthreshold swing = 0.43 V/dec, and threshold voltage = −2.2 V) and adequate PBS and NBIS stabilities of IGTO TFTs.