To modulate the electronic and optical properties of graphene oxide via controlled deoxidation, a proper understanding of the role of the individual functional group in determining these properties is required. We, therefore, have performed ab initio density functional theory based calculations to study the electronic and optical properties of model structures of graphene oxide with different coverages and compositions. In particular, we considered various concentrations of major functional groups like epoxides, hydroxyls, and carbonyls, which mainly consititute the graphene oxide and the reduced graphene oxide. Our calculated electron energy loss spectra (EELS) demonstrate the π plasmon peak to be less sensitive, while π + θ plasmon is found to have a significant blue shift of about 1.0-3.0 eV, when the concentration of epoxy and hydroxyl functional groups in graphene oxide vary from 25% to 75%. However, the increase in carbonyl groups in the center of the graphene sheet creates holes, which lead to the red shift of the EELS. In the case of 37.5% of oxygen-to-carbon ratio, we find the π plasmon peak to be shifted by roughly 1.0 eV as compared to that of the pristine graphene. Our results agree well with the experimental findings which suggest a blue shift in the EELS of graphene oxide and an absorption feature due to a π electron transition of the carbonyl groups at a lower energy than that of epoxy and hydroxyl groups. We also show that the increase in the width of the hole created by the carbonyl groups significantly decreases the optical gap and opens the band gap, and thus, we argue that reduced graphene oxide with mostly carbonyl groups could be a useful material for developing tunable opto-electronic nanodevices. © 2011 American Chemical Society.