Optical and magnetic properties of graphene oxide (GO) have been intensively investigated because of the promising applications of GO-related materials in various technical fields. So far, the optical and magnetic properties of GO have been discussed independently. However, localized electronic states in reduced GO may simultaneously add optical transitions and spin moments in sp(2) nanodomains in GO nanosheets. In the present study, the structural, optical, and magnetic properties of graphene oxide (GO) photoreduced in an aqueous solution are correlated on the basis of experimental and theoretical investigations. Experimental observations show that photoreduction leads to enhancement of visible absorption, quenching of photoluminescence, and emergence of magnetism. Detailed spectroscopic and microscopic characterizations indicate the presence of photoreduction-produced basal plane CH bonding and carbon vacancies. Ab initio calculations suggest that the presence of these defects in sp2 nanodomains results in singly occupied molecular orbital levels in the pi-pi* gap to afford enhanced visible to near-infrared (NIR) absorption and emergence of magnetism, which is consistent with the experimentally observed change in the optical and magnetic properties of GO by photoreduction. Enhancement of NIR emissions observed in shortly photoreduced GO and their extinction found in longer photoreduced GO are explained with integrating the theoretical calculations and time-resolved fluorescence measurements. The correlation among structural, optical, and magnetic properties, highlighted for the first time, could help accelerate the development of open-shell nanographene devices with concurrently tunable electrical, optical, magnetic, and electrochemical properties.