Interfaces in transition metal oxides play critical roles for tuning physical properties. In thin film form, multiple interfaces can be created in between a film and a substrate, in between a film and air, and within a thin film. The role of each interface has been rarely studied. In this research, we used MoO2 as a model system to study the role of the oxidized layer at film-air interface in thickness-driven metal-insulator transition. The oxidized layer at the surface is likely to be the main cause in positive temperature coefficient of resistivity in MoO2 thin films thinner than about 20 nm. To find the origin of this insulating behavior in electronic transport measurements, we used x-ray diffraction, density functional theory and various spectroscopic methods. We observed the formation of oxidized MoO2+x at the film-air interface and its thickness explain the peculiar insulating behavior in the thinner films and even nanoparticles from the literature.