In this study, transparent conducting aluminum-doped ZnO thin films (AZO) were deposited on glass substrates by a water-based liquid phase deposition method. The results show that by employing a two-step post-deposition heat treatment, the preferential orientation of ZnO (002) appeared as soon as the polycrystalline films were formed. Under a reducing atmosphere, the crystallinity of the films was effectively improved. Furthermore, the reducing atmosphere was also beneficial for the removal of the residual stress of the prepared films and the c-axis lattice constant was less stretched as compared to those under an inert atmosphere at identical T-p. Both the atomic force micrograph and scanning electron micrograph clearly exhibited that the heat treatment induced considerable grain growth. The X-ray photoelectron spectrum revealed that the heat treatment atmosphere had little impact on the bonding state of zinc and that the reducing atmosphere was favorable for the non-stoichiometric alumina, which in turn, resulted in more oxygen vacancies and led to improvement in electrical conductivity. The ratio of chemisorbed oxygen declined substantially when applying the reducing atmosphere. Accordingly, hydrogen was helpful for the reduction of chemisorbed oxygen onto AZO films. Generally, the electrical resistivity declined linearly with T,,. A minimum resistivity of 9.90x 10(-3) Omega.cm was obtained with a doping concentration of Al/Zn = 2.25 at.% at T-p = 700 degrees C. The largest mean free path of the carriers was 12 angstrom. which was much smaller than the observed grain sizes of the AZO films. Accordingly, the grain boundary scattering was not the detrimental scattering mechanism. In contrast, the scattering within the grains was responsible for the low mobility. An increase in optical transparency with the heat treatment temperature was observed due to the compact and smooth topography with larger grains, among which, less porous structures were formed at elevated temperature. (C) 2011 Elsevier B.V. All rights reserved.