We report magnetization measurements of As-deficient LaO0.9F0.1FeAs 1−δ (δ ≈ 0.06) samples with improved superconducting properties as compared with As-stoichiometric optimally doped La-1111 samples. In this As-deficient system with almost homogeneously distributed As-vacancies (AV), as suggested by the 75 As-nuclear quadrupole resonance (NQR) measurements, we observe a strong enhancement of the spin-susceptibility by a factor of 3-7. This observation is attributed to the presence of an electronically localized state around each AV, carrying a magnetic moment of about 3.2 µB per AV or 0.8 µB/Fe atom. From theoretical considerations we find that the formation of a local moment on neighboring iron sites of an AV sets in when the local Coulomb interaction exceeds a critical value of ∼ 1 eV in the dilute limit. Its estimated value amounts to ∼ 2.5 eV and implies an upper bound of ∼ 2 eV for the Coulomb repulsion at Fe sites beyond the first neighbor-shell of an AV. Electronic correlations are thus moderate/weak in doped La-1111. The strongly enhanced spin susceptibility is responsible for the Pauli limiting behavior of the superconductivity that we observe in As-deficient LaO0.9F0.1FeAs 1−δ . In contrast, no Pauli limiting behavior is found for the optimally doped, As-stoichiometric LaO0.9F0.1FeAs superconductor in accord with its low spin susceptibility.