Bismuth oxide thin films were deposited by room temperature reactive magnetron sputtering of a bismuth target in different Ar/O2 atmospheres. The analysis of their structures and compositions shows that the films are formed of different phases depending on the oxygen flow rate (ՓO2). Films deposited at low ՓO2 consist of mixtures of crystalline metallic bismuth (Bio) and bismuth oxide phase (Bi2O3). Moreover, XPS analysis revealed the contribution of different oxidation states of bismuth related to Bio and Bi3+ in Bi2O3. The optical properties were investigated by spectroscopic ellipsometry and confirmed by UV–Vis spectroscopy. As ՓO2 increases above 1 sccm, bismuth oxide films become more transparent. They highly transmit light in the visible range, and the optical absorption edge shifts to short-wavelength such that the films exhibit higher bandgap values. Furthermore, the photocatalytic performance was determined upon comparing the degradation of 6.6 × 10−5 M of methyl orange (MO) under UV–Vis irradiation in the presence of different thin films. Results show that the low crystallinity, the improved optical absorption, as well as the existence of Bio in small proportion, increase the separation efficiency of the generated e−/h+ pairs inhibiting their recombination, thus enhancing the photocatalytic degradation of MO dye.