Because defects such as oxygen vacancies (V) can affect the properties of nanomaterials, investigating the defect structure-function relationship are attracting intense attention. However, it remains an enormous challenge to the synthesis of nanomaterials with high sensing performance by manipulating V because understanding the role of surface or bulk V on the sensing properties of metal oxides is still missing. Herein, InO nanoparticles with different contents of surface and bulk V were obtained by hydrogen reduction treatment, and the role of surface or bulk V on the sensing properties of InO was investigated. The X-ray diffraction, ultraviolet-visible spectrophotometer, electron paramagnetic resonance, photoluminescence, Raman, X-ray photoelectron spectroscopy, Hall analysis, and the sensing results indicate that bulk V can decrease the band gap and energy barrier and increase the carrier mobility, hence facilitating the formation of chemisorbed oxygen and enhancing the sensing response. Benefiting from bulk V, InO-H10 exhibits the highest response, good selectivity, and stability for formaldehyde detection. However, surface V does not contribute to the improvement of formaldehyde-sensing performance, and the black InO-H30 with the highest content of surface V exhibits the lowest response. Our work provides a novel strategy for the synthesis of nanomaterials with high sensing performance by manipulating V.