The effect of heat treatment in various environments on the electrical and optical properties of indium–tin oxide (ITO) sputtered films has been investigated. As the resistivity is decreased by heat treatment in H2from 8.3×10−3to 4.3×10−4&OHgr; cm, the optical band gap increases from 3.05 to 3.42 eV consistent with a Burstein shift and intrinsic band gap of 2.98 eV, and for resistivities less than 8.3×10−4&OHgr; cm there is a rapid decrease in transmission at longer wavelengths due to free‐carrier absorption and formation of dendritic precipitates. Careful control over all sputtering variables is essential to obtain reproducible properties.