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We have deposited rare earth (erbium) doped zinc oxide (ZnO: Er) thin films on ITO glass substrates using sol gel "dip coating" process. Thin films were annealed at 400°C and 500°C for 60 min and tried to observe the effect of annealing temperature on structural, morphological and optical properties of EZO films. The morphological, structural and optical properties were studied by Atomic force Microscopy (AFM), X-ray Diffraction techniques (XRD) and UV–visible spectrophotometer. The deposited films were found to be well crystallized with hexagonal wurtzite structure having a preferential growth orientation along the ZnO (002) plane.  The AFM images show that the roughness of the films has increased from 16 to 27 nm with an increase in the annealing temperature (400°C to 500°C). A red-shift was observed in the band gap of EZO films with increasing annealing temperature, the red shift of the band gap in the ZnO: Er films treated at high temperature was observed as the crystallinity of the films became better. The optical transmittance of rare earth element (Er) doped ZnO thin films were increased when increasing annealing temperature. The Er doped ZnO thin films showed high transparency (>85) in the visible region (400-700 nm). Rare earth elements (RE) (Er), which are a hot topic to study for its optical emission due to their intra 4f-4f shell transitions, doping into the ZnO can achieve photoluminescence properties of ZnO.