We uncover a dual mechanism by which oxygen defects suppress superconductivity in the bilayer nickelate ${\mathrm{La}}_3{\mathrm{Ni}}_2{\mathrm{O}}_{7+\delta }$ using density functional theory, dynamical mean-field theory, and functional renormalization group analysis. Apical vacancies and interbilayer interstitials emerge as the dominant low-energy defect species and are further stabilized by orthorhombic domain walls. These two defect classes drive the electronic structure in opposing directions. Vacancy-induced disorder generates local magnetic moments and promotes Anderson localization at moderate concentrations, whereas periodic interstitial ordering yields a coherent but weakly correlated metallic background that fails to support superconductivity. These findings highlight the decisive role of oxygen defects in shaping superconductivity and provide microscopic guidance for improving it through controlled defect engineering.

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• Superconductivity
• Nickelates
• Unconventional superconductors
• Density functional theory
• Dynamical mean field theory
• Functional renormalization group