Oxygen-deficient BaAl2O4, with strong optical absorption in the spectra range from 200 to 2500 nm, was prepared by a simple and economic thermal treatment of BaAl2O4 in a H2 gas flow. Further studies found that a molar ratio of oxygen vacancies of about 0.4 % existed in the prepared oxygen-deficient BaAl2O4 sample. The influence of oxygen vacancies on the electronic band structures and optical absorption of BaAl2O4 are elucidated via first principle calculations. Oxygen vacancies introduce impurity states above the valence band; these impurities expand and enhance the optical absorption of BaAl2O4. This approach is proposed to develop a new type of optical materials and to be applicable to many wide bandgap materials.