Structural symmetry-breaking is a key strategy to modify the physical and chemical properties of two-dimensional transition metal dichalcogenides. However, little is known about defect formation during this process. Here, with atomic-scale microscopy, we investigate the evolution of defect formation in monolayer MoS2 exposed indirectly to hydrogen plasma. At the beginning of the treatment only top-layer sulfur atoms are removed, while vacancies and the molybdenum atomic layer are maintained. As processing continues, hexagonal-shaped nanocracks are generated along the zigzag edge during relaxation of defect-induced strain. As defect density increases, both photoluminescence and conductivity of MoS2 gradually decreases. Furthermore, MoS2 showed increased friction by 50% due to defect-induced contact stiffness. Our study reveals the details of defect formation during the desulfurization of MoS2 and helps to design the symmetry-breaking transition metal dichalcogenides, which is of relevance for applications including photocatalyst for water splitting, and Janus heterostructures.