(111) preferentially oriented Ag2O film deposited by direct current reactive magnetron sputtering is annealed by rapid thermal processing at different annealing temperatures for 5 min. The film microstructure and optical properties are then characterized by x-ray diffractometry, scanning electron microscopy, and spectrophotometry, respectively. The results indicate that no clear Ag diffraction peak is disceable in the Ag2O film annealed below 200°C. In comparison, the Ag2O film annealed at 200°C begins to exhibit characteristic Ag diffraction peaks, and in particular the Ag2O film annealed at 250°C can demonstrate enhanced Ag diffraction peaks. This implies that the threshold of the thermal decomposition reaction to produce Ag particles is approximately 200°C for the Ag2O film. In addition, an evolution of the film surface morphology from compact and pyramid-like to a rough and porous structure clearly occurred with increasing annealing temperature. The porous structure might be attributable to the escape of the oxygen produced during annealing, while the rough surface might originate from the reconstruction of the surface. The dispersion of interference peak intensity in the reflectance and transmission spectra could be attributed to the Ag particles produced. The lowered crystallinity and Ag particles produced induce a lattice defect, which results in an enhanced transmissivity in the violet region and a weakened transmissivity in the infrared region.