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Photochromic oxygen-containing yttrium hydride (YHO) thin films with switchable optical properties have recently emerged as a promising material for the utilization in smart windows and sensor applications. In the present study, we have prepared YHO thin films with a lateral gradient of oxygen and hydrogen concentrations, which allows us to systematically investigate the effect of changes in chemical composition on their optical properties. We show that when the average lateral oxygen content exceeded a threshold level at a certain location in the as-deposited film, its appearance was abruptly changed from black opaque to yellow transparent, in which only yellow YHO exhibited photochromism. Moreover, we show that a small region (typically 510 mm lateral size) in the black opaque part of the as-deposited film, located adjacent to the yellow transparent part of the film, was observed to transform permanently to yellow transparent upon exposure to oxygen in air in the dark for several weeks. The black to yellow color transformation was caused by an increase in the oxygen concentration, originating from the oxidation process. Optical characterization revealed pronounced photo chromic response in the transformed region as compared to the rest of the yellow film. This finding demonstrates that the switchable optical properties can be tailored by changing the chemical composition of YHO films.