The magnesium doped zinc oxide is a promising optical material to enhance the luminescence for possible application in solid state lighting. Magnesium doped zinc oxide thin films (Zn(0.85)Mg(0.15)O) were deposited by sol-gel route on p-type silicon and annealed at different temperatures in oxygen environment for an hour. The doping of magnesium in zinc oxide was confirmed by X-Ray diffraction and the samples were found to have wurtzite crystal structure with (002) preferred orientation. The films were characterized by Hall-effect, atomic force microscopy. UV-VIS spectroscopy, photoluminescence (PL) and work function measurements. The different studies exhibited an anomalous behavior for the film annealed at 900 degrees C. The Hall effect, work function measurements and UV-VIS spectroscopy indicated that the resistivity, work function and optical band gap increased as a function of annealing temperature (from 300 degrees C to 700 degrees C) however these parameters were found to decrease for the films annealed above 700 degrees C. The particle size increased with the annealing but for the samples annealed at 900 degrees C, the shape of the grains changed and became elongated like fibers as observed by the atomic force microscopy. The PL measurements displayed the existence of oxygen vacancies defects for the samples annealed at and above 600 degrees C. The possible mechanism for this anomaly has been discussed in this work. (C) 2010 Published by Elsevier B.V.