Nanocrystalline indium oxide films have been deposited using pulsed laser ablation technique. The effect of post-deposition annealing on the structural, morphological, electrical and optical properties of the as-deposited indium oxide thin films prepared by non-reactive pulsed laser ablation has been studied systematically using X-ray diffraction (XRD), scanning electron microscopy (SEM), atomic force microscopy (AFM), UV–vis spectra, photoluminescence spectra and DC electrical measurements. X-ray diffraction analysis reveals that at higher annealing temperatures, all the films exhibit a polycrystalline structure with a preferred orientation along (400) lattice plane instead of mostly occurring (222) reflection plane. The lattice constants, biaxial strain and lattice strain of the films are calculated and correlated with annealing temperature. Particle size calculated using Debye Scherrer's formula reveals the presence of quantum dots in the films annealed at 473K and 773K and confirmed via SEM and AFM analysis. Mass transport mechanisms have been proposed using SEM and AFM to account for the grain coalescence process viz., Ostwald ripening mechanism, sintering, and cluster migration. A blue shift in the band gap energy values are obtained for the films and is due to quantum confinement effect as a result of their nanostructured nature. Enhanced quantum confinement effect due to the increase in porosity in the films is also observed. Efficient photoluminescence emission is observed in all the films in the UV region and corresponds well with the band gap values obtained for the films. Electrical measurements show that the electrical conductivity in the films increases with decrease in dot size.