In this article, we investigate the effect of annealing in deuterium (D2) ambient on the performance and reliability of InGaZnO (IGZO) thin-film transistors (TFTs). We examined the current-voltage (I–V) characteristics, as well as the on-state current (<inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$I_{\text{on}}$ </tex-math></inline-formula>), off-state current (<inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$I_{\text{off}}$ </tex-math></inline-formula>), and subthreshold slope (SS) under three different conditions: after device fabrication (as-fabricated), in a deteriorated state (after 7 days), and after D2 annealing. To analyze the reliability of IGZO TFTs, the oxygen vacancy (<inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$V_{\text{O}}$ </tex-math></inline-formula>) behavior was observed by extracting the subgap density of state (DOS) using I–V data. Quantitative and qualitative analyses of the changes in ion distribution inside the IGZO channel after D2 annealing were performed by X-ray photoelectron spectroscopy (XPS) and secondary-ion mass spectrometry (SIMS), respectively, both of which verified the effect of the D2 annealing. The validity of our results was further verified by comparing them to model parameters generated using a technology computer-aided design (TCAD) simulation.