Understanding defect effect on carrier dynamics is essential for both fundamental physics and potential applications of transition metal dichalcogenides (TMDs). Here, the phenomenon of oxygen impurities trapping photoexcited carriers has been studied with ultrafast pump-probe spectroscopy. Oxygen impurities are intentionally created in exfoliated multilayer MoSe2 with Ar+plasma irradiation and air exposure. After plasma treatment, the signal of transient absorption first increases and then decreases, which is a signature of defect-capturing carriers. With larger density of oxygen defects, the trapping effect becomes more prominent. The trapping defect densities are estimated from the transient absorption signal, and its increasing trend in the longer-irradiated sample agrees with the results from X-ray photoelectron spectroscopy. First-principle calculations with density functional theory reveal that oxygen atoms occupying Mo vacancies create mid-gap defect states, which are responsible for carrier trapping. Our findings shed light on the important role of oxygen defects as carrier trappers in TMDs, and facilitate defect engineering in relevant materials and device applications.