We have systematically investigated the effect of oxidation on the structural and electronic properties of graphene based on first-principles calculations. Energetically favorable atomic configurations and building blocks are identified, which contain epoxide and hydroxyl groups in close proximity with each other. Different arrangements of these units yield a local-density approximation band gap over a range of a few eV. These results suggest the possibility of creating and tuning the band gap in graphene by varying the oxidation level and the relative amount of epoxide and hydroxyl functional groups on the surface.