We describe the effect of annealing in air and in vacuum on structural, electrical and optical properties of indium nitride (InN) thin films. The films were grown by modified activated reactive evaporation. Films annealed in air were transformed to In2O3 at 450 degrees C whereas films annealed in vacuum started decomposing at 500 degrees C. The c-lattice constant was found decreasing for increasing annealing temperature due to reduction of excess nitrogen in the films. The major changes in structural, electrical and optical properties appear around 400 degrees C. Both air and vacuum-annealed films show a reduction in the carrier concentration with annealing, explaining the observed reduction in bandgap (Moss-Burstein shift) for vacuum-annealed films. For air-annealed films, the bandgap increases when annealed, which may be due to oxynitride formation overcoming the effect of reduced carrier concentration. A decrease in the photoluminescence intensity was observed at 400 degrees C for air-annealed and 500 degrees C for vacuumannealed films which can be attributed, respectively, to the presence of indium oxide and indium in the films. Optimal annealing temperature was observed between 400 and 450 degrees C in vacuum. (C) 2009 Elsevier B.V. All rights reserved.