The role of palladium (Pd) in the reduction of graphene oxide (GO) thin films was investigated using a Pd assisted grafting technique. The structural and optical characteristics of these thin films were obtained from various spectroscopic analyses, which confirmed increased CC-C aromatic ring vibration and oxidation of Pd with Ar annealing. In Pd free GO, annealing of films resulted in restoration of sp2 clusters; however, Pd grafting with non-annealed film enhanced the possibility of restoration and further annealing dramatically increased the restoration rate with enhanced blue photoluminescence (PL) emission. The blue PL emission originates from sp2 cluster sites and the yellow-green PL from defect trapped states. As reduction of GO increased, yellow-green emission decreased and blue PL became the prominent emission. These experimental findings open up a new feasible pathway for controlling the luminescence emission from graphene oxide that furthers the technological advancement of graphene based optoelectronic devices.