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Engineering the electronic bandgap is of utmost importance in diverse domains ranging from information processing and communication technology to sensing and renewable energy applications. Transition metal dichalcogenides (TMDCs) provide an ideal platform for achieving this goal through techniques including alloying, doping, and creating in-plane or out-of-plane heterostructures. Here, we report on the synthesis and characterization of atomically controlled two-dimensional graded alloy of MoxW1-xS2, wherein the center region is Mo rich and gradually transitions towards a higher concentration of W atoms at the edges. This unique alloy structure leads to a continuously tunable bandgap, ranging from 1.85 eV in the center to 1.95 eV at the edges consistent with the larger band gap of WS2 relative to MoS2. Aberration-corrected high-angle annular dark-field scanning transmission electron microscopy showed the presence of sulfur monovacancy, VS, whose concentration varied across the graded MoxW1-xS2 layer as a function of Mo content with the highest value in the Mo rich center region. Optical spectroscopy measurements supported by ab initio calculations reveal a doublet electronic state of VS, which was split due to the spin-orbit interaction, with energy levels close to the conduction band or deep in the band gap depending on whether the vacancy is surrounded by W atoms or Mo atoms. This unique electronic configuration of VS in the alloy gave rise to four spin-allowed optical transitions between the VS levels and the valence bands. Our work highlights the potential of simultaneous defect and optical engineering of novel devices based on these 2D monolayers., Comment: 65 pages, 7 figures in main text. 21 figures in supplemental data