In this paper, we report on a novel material: nanostructured CdS:O film prepared at room temperature by rf sputtering, and its application in CdTe solar cells. The CdS:O film has a higher optical bandgap (2.5-3.1 eV) than the poly-CdS film and a nanostructure; the bandgap increases with an increase of oxygen content (from ~4 at.% to ~23 at.%) and a decrease of grain size (from about a few hundred Å to a few tenths Å). Our results have also demonstrated that the higher oxygen content presented in the nanostructured CdS:O films can significantly suppress the Te diffusion from the CdTe into the CdS film and the formation of a CdS 1-y Te y alloy with a lower bandgap that results in poor quantum efficiency in the shortwavelength region. The preliminary device results have demonstrated that the J sc of the CdTe device can be greatly improved by exploiting the thin nanostructured CdS:O film, while maintaining higher V oc and FF. We have fabricated a CdTe cell demonstrating an NREL-confirmed total-area efficiency of 15.5%.