The effect of annealing on the optical properties of indium tin oxide films prepared by d.c. magnetron sputtering was investigated. The influence of annealing can be described in terms of a change in free electron concentration. With an increase in carrier concentration the absorption edge due to the direct and the indirect transition shifts to the near UV. The intrinsic band gap is found to be 3.53 eV, the intrinsic indirect transition energy is 1.80 eV. The effective electron mass is 0.31 m0 and 1.0 m0 for electrons in the conduction and the valence band respectively.