MXenes, a new family of functional two-dimensional (2D) materials, have shown great potential for an extensive variety of applications within the last decade. Atomic defects and functional groups in MXenes are known to have a tremendous influence on the functional properties. In this review, we focus on recent progress in the characterization of atomic defects and functional group chemistry in MXenes, and how to control them to directly influence various properties (e.g., electron transport, Li+adsorption, hydrogen evolution reaction (HER) activity, and magnetism) of 2D MXenes materials. Dynamic structural transformations such as oxidation and growth induced by atomic defects in MXenes are also discussed. The review thus provides perspectives on property optimization through atomic defect engineering, and bottom-up synthesis methods based on defect-assisted homoepitaxial growth of MXenes.