As a great promising material for third-generation thin-film photovoltaic cells, hydrogenated nanocrystalline silicon (nc-Si:H) thin films have a complex mixed-phase structure, which determines its defectful nature and easy residing of oxygen impurities. We have performed a detailed investigation on the microstructure properties and oxygen impurities in the nc-Si:H thin films prepared under different hydrogen dilution ratio treatment by the plasma-enhanced chemical vapor deposition (PECVD) process. X-ray diffraction, transmission electron microscopy, Raman spectroscopy, and optical transmission spectroscopy have been utilized to fully characterize the microstructure properties of the nc-Si:H films. The oxygen and hydrogen contents have been obtained from infrared absorption spectroscopy. And the configuration state of oxygen impurities on the surface of the films has been confirmed by X-ray photoelectron spectroscopy, indicating that the films were well oxidized in the form of SiO 2. The correlation between the hydrogen content and the volume fraction of grain boundaries derived from the Raman measurements shows that the majority of the incorporated hydrogen is localized inside the grain boundaries. Furthermore, with the detailed information on the bonding configurations acquired from the infrared absorption spectroscopy, a full explanation has been provided for the mechanism of the varying microstructure evolution and oxygen impurities based on the two models of ion bombardment effect and hydrogen-induced annealing effect.