This study investigates the influence of different annealing ambient on terbium oxide (Tb4O7) passivation layers sputtered using radio frequency (RF) sputtering on silicon (Si) substrates. The passivation layers were subjected to annealing in various ambient, including oxygen (O2), nitrogen (N2), argon (Ar), and nitrogen-oxygen-nitrogen (NON). The structural, morphological, compositional, topological, and optical properties of the passivation layers were characterized using various techniques. The obtained results indicate that the annealing ambient has a significant impact on the properties of Tb4O7 passivation layers. Annealing in Ar ambient leads to the formation of Tb4O7 with improved crystallinity close to 49.75 nm and higher surface roughness at (2.32 nm). In contrast, annealing in the O2 ambient results in broad GIXRD peaks with the lowest surface roughness around (1.34 nm). Notably, annealing in N2 ambient exhibits an intermediate behavior, with partial crystallized size values (31.80 nm) compared to the Tb4O7 passivation layer annealed in Ar ambient and moderate surface roughness. The optical bandgap (Eg) was estimated by applying the Kubelka–Munk (KM) approach and the obtained values were 3.28, 3.17, 2.37, and 2.27 eV for annealed in O2, N2, Ar, and NON ambients, respectively. The investigation of Tb4O7 as a passivation material expands the range of materials available for semiconductor device fabrication, offering potential advancements in optoelectronics applications. Therefore, the significance of this study lies in its contribution to the optimization of Tb4O7 passivation layers in the field of semiconductor device technology. Hence, the sample annealed in an Ar ambient demonstrated the best results in terms of structural, morphological, compositional, topological, and optical properties of Tb4O7 passivation layers as compared to other samples.