Narrow bandgap tungsten oxide (WO3-x) nanoparticles have been synthesized by single-step plasma discharge in deionized water between two vertically pointed tungsten electrodes. Bombardment of energetic electrons on the as-formed nanoparticles in the plasma zone creates defect states. Formation of electron-rich oxygen vacancies on the crystal planes and grain boundary defects have been investigated. The peak shift and broadening in the Raman and FTIR spectra indicate the formation of oxygen vacancies and sub-stoichiometric WO3 nanoparticles. EDX analysis provides the ratio of tungsten to oxygen to be around 1:2.4. Optical bandgap has been found to be 2.15 eV, which is less than the bulk value of 2.54 eV. Observation of higher amount of defect states from TEM and XPS provides the reason for the formation of narrow bandgap tungsten oxide nanoparticles. The photocatalytic efficiency of the plasma synthesize WO3-x nanoparticles is found to be higher than that of commercial bulk and nano WO3 particles.