Titania nanoparticles (anatase or anatase + rutile) with enhanced photocatalytic activity were successfully produced by treating titanyl sulfate with various peroxo compounds (hydrogen peroxide, ammonium persulfate, and urea hydrogen peroxide) with further annealing. Transformation of titanyl sulfate to titanium dioxide was investigated by X-ray diffraction, electron microscopy, X-ray microanalysis, IR, Raman, X-ray photoelectron, and UV/vis spectroscopy. The peroxo compound and annealing temperature play an important role in phase composition and properties of the samples. Correlations between phase composition, oxygen content, band gaps, and constant rates for methyl orange (MO) discoloration were found. The [TiOx(O2)2−x(H2O)m] phase, which forms on the first stage of the reaction, contains nanoparticles with small crystallites (1–2 nm) and promotes formation of titanium dioxide with the anatase structure. Thermal decomposition of the peroxo-containing phase results in formation of titanium dioxide. Oxygen excess prevents transformation of anatase to rutile, decreases band gap, and increases activity of titanium dioxide (anatase or anatase + rutile) in the model reaction of MO destruction.