In this study, the influence of air annealing on nanometer-thin indium tin oxide (ITO) transistors was investigated. Compared with unannealed devices, the field-effect mobility and subthreshold swing of ultrathin ITO transistors with pre-annealing, post-annealing, and two-step annealing were greatly improved. Under a pre-annealing temperature at 200 °C and post-annealing temperature at 100 °C, the ultra-thin ITO transistors showed field-effect mobility of 34.2 cm2/Vs, steep subthreshold swing of 1.95 V/decade, and high Ion/Ioff ratio of 2.46 × 107. X-ray photoelectron spectroscopy revealed that the performance changes could be ascribed to the changes in the oxygen vacancies in the ITO channel under different annealing conditions. The dependence of subthreshold swing on the annealing process may be related to the absorption and release of water molecules from the ultrathin ITO surface. Overall, these results emphasize the importance of the annealing procedures for nanometer-thin ITO transistors.