Thin (≈1 μm), waveguiding and c-axis oriented ZnO films of good optical quality have been fabricated on corning glass substrates by r.f. magnetron reactive sputtering without substrate heating. The optical parameters of the films deposited in different O2:Ar sputtering gas mixtures were found to vary. The extraordinary and ordinary refractive indices (ne and no respectively) of the ZnO film grown in 60% O2 and 40% Ar were found to be the highest (ne=1.9876, no=1.9692) and closest to bulk single crystal values, and the birefringence of the film was ≈0.018. The films were annealed at 380 °C in air for 1 h, as a result of which the crystalline quality of the films was found to improve with increase in X-ray density and decrease in stress. While the refractive index decreased, the propagation loss was lowered substantially (3–5 dB/cm) as a result of annealing. The annealed zinc oxide film with minimum stress exhibited lowest loss (3 dB/cm) and highest birefringence (≈0.018). This indicated a correlation between propagation loss and stress.