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Engineering electronic bandgaps is crucial for applications in information technology, sensing, and renewable energy. Transition metal dichalcogenides (TMDCs) offer a versatile platform for bandgap modulation through alloying, doping, and heterostructure formation. Here, the synthesis of a 2D MoxW1‐xS2 graded alloy is reported, featuring a Mo‐rich center that transitions to W‐rich edges, achieving a tunable bandgap of 1.85 to 1.95 eV when moving from the center to the edge of the flake. 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 is split due to the spin‐orbit interaction, with energy levels close to the conduction band or deep in the bandgap 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. The study demonstrates the potential of defect and optical engineering in 2D monolayers for advanced device applications. [ABSTRACT FROM AUTHOR]