Ball-milled flake graphite is first employed as precursor to synthesize graphene nanosheets (GNs) by a technique of oxidation-reduction to study the change of crystal structure. The GNs are then used as catalytic materials for counter electrode in dye-sensitized solar cells (DSCs), and the influence of the succeeding heat treatment of the GNs counter electrode on the photovoltaic properties of the device is finally investigated. Results show that the crystal structure of the GNs is improved by introducing the ball-milling of flake graphite, the thickness of the GNs is reduced and the distance d(002) of graphene layer is increased. Compared with the GNs prepared from natural flake graphite, the improved GNs as catalytic materials have higher catalytic activity and stronger capability of electrolyte diffusion, resulting in significant improvement in the efficiency of the DSCs. Through the heat treatment, the catalytic activity and the electrolyte diffusion capability of the GNs counter electrode are obviously strengthened, and the efficiency of the device is raised from 1.17% to 1.54% with an increment of 31.3%.