The effects of thermal annealing of titanium oxide films deposited by ion-beam assistance at annealing temperatures from 100 degrees C to 300 degrees C on the residual stress and optical properties of the films was investigated. The refractive indices and extinction coefficients increased gradually as the temperature was increased from 100 degrees C to 200 degrees C and then declined gradually as the temperature was increased further from 200 degrees C to 300 degrees C. The film lost oxygen and slowly generated lower suboxides as the annealing temperature was reduced below 200 degrees C, as determined by x-ray photoelectron spectroscopy (XPS). As the annealing temperature increased above 200 degrees C, the lower suboxides began to capture oxygen and form stable oxides. XPS measurements were made to verify both the binding energy associated with the Ti 2p line and the variation of the O 1s line. A Twyman-Green interferometer was employed for phase-shift interferometry to study the residual stress. The residual stress declined as the temperature was reduced from 100 degrees C to 200 degrees C because the lower suboxides reduced the stress in the film. Above 200 degrees C, the film began to capture oxygen, so the residual stress rose. At 300 degrees C, the film was no longer amorphous as the anatase was observed by x-ray diffraction.