In this paper，CdS polycrystalline thin films were prepared with the close-spaced sublimation （CSS） technology. In the deposition process，a controlled ambient of Ar and O2 mixture was used. The effect of oxygen on the microstructure，composition，morphology as well as optical and electrical properties of CdS thin films were studied systemically by XRD，XPS，AFM，UV-VIS and four-probe array method. The results showed that the CSS-grown CdS thin film has the hexagonal structure with crystallite size about 40 nm and the composition of them were rich in S. The impurity oxygen atoms mixed into CdS thin films and partly formed CdO，and with the increase of O2 concentration the chemical composition tinds more closely to the ideal stoichiometric proportion of CdO，the optical gap of thin films broadened and the ratio of photoconductivity to darkconductivity increased. Fortunately these effects are benefitial to CdS thin films for the photovoltaic application as a window layer.Additionally，it view of CdS/CdTe interface，we investigated the influence of oxygen on the cross-section morphology of CdS/CdTe thin films and the spectral response （SR） of the device. Then the results indicated that with the increase of O2 concentration in deposition ambient，the interdiffusion between CdS and CdTe decreased，and the SR of device in the range from 500 nm to 600 nm increased.We believe that the oxygen in CSS-grown CdS thin films plays a very important role in two aspects，firstly in improving the quality of CdS thin films for photovoltaic application，secondly in optimizing the CdS/CdTe interfacial properties in the CdTe solar cells.