CdS films were grown on glass and ITO/glass substrates by the electroless chemical-bath deposition technique. Structural and optical studies were carried out by X-ray diffraction (XRD), ellipsometry and absorption spectroscopy of the samples. Critical investigation of the characteristic X-ray peak for hexagonal CdS reveals that, under similar deposition and annealing conditions, the peak always occurs at a slightly higher angle for films grown on glass substrates than for those deposited on ITO/glass substrates. The shift in the peak is attributed to the additional stresses present in thin CdS films deposited onto ITO/glass substrates due to the large lattice mismatch between CdS and ITO. The stress decreases on annealing due to the possible appearance of compressive stresses in the films arising from the difference between the thermal expansion coefficients of CdS and the substrate materials. Ellipsometric studies also show that the refractive indices of the films deposited onto ITO/glass substrates differ from those of the films deposited onto glass substrates. This difference decreases with increasing annealing temperature. The stresses generated in the films were also studied using the optical spectra of the samples; it was assumed that the below bandgap optical absorption in the films is due to the structural imperfections present. The strains obtained from optical analysis are consistent with the findings of the structural studies by XRD.