Aluminum-doped zinc oxide (AZO) thin films were prepared on glass substrate using a magnetron sputtering system. In this work, a powder target was used as a source material for low cost applications, instead of a conventional sintered ceramic target. The effects of the hydrogen gas ratio on the electrical and optical properties of the AZO films. The hydrogen doped AZO (AZO:H) films had a hexagonal polycrystalline structure. A small amount of hydrogen gas deteriorated the electrical and optical properties of the AZO:H films. However, these properties improved, as the H2/(H2 + Ar) gas ratio increased. The AZO:H films grown at an H2/(H2+Ar) ratio of 10% showed good properties for low cost applications, such as a low resistivity of 1.35 x 10(-3) Ω-cm, high average transmittance of 83.1% in the visible range of light.