Understanding and controlling defect in two-dimensional materials is important for both linear and nonlinear optoelectronic devices, especially in terms of tuning nonlinear optical absorption. Taking advantage of an atomic defect formed easily by smaller size, molybdenum disulfide nanosheet is prepared successfully with a different size by gradient centrifugation. Interestingly, size-dependent sulfur vacancies are observed by high-resolution X-ray photoelectron spectroscopy, atomic force microscopy, and transmission electron microscopy. The defect effect on nonlinear absorption is investigated by Z-scan measurement at the wavelength of 800 nm. The results suggest the transition from saturable absorption to reverse saturable absorption can be observed in both dispersions and films. First principle calculations suggest that sulfur vacancies act as the trap state to capture the excited electrons. Moreover, an energy-level model with the trap state is put forward to explain the role of the sulfur vacancy defect in nonlinear optical absorption. The results suggest that saturable absorption and reverse saturable absorption originate from the competition between the excited, defect state and ground state absorption. Our finding provides a way to tune the nonlinear optical performance of optoelectronic devices by defect engineering.