Epitaxially grown CdS thin films on ITO substrates are prepared by using the chemical bath deposition method. As-deposited films are annealed in Ar at 450 degrees C for 6 h and 24 h and the effect of annealing on structural and morphological properties are studied. From the psi rocking curves of high resolution x-ray diffractometer, one can find that after annealing, the metastable nanocrystallite cubic phase transforms into the stable crystalline hexagonal phase, in which its behavior depends on the exposure time to heat. Experimental data revealed that alpha-CdS thin films were crystallized at an initial stage of annealing and that after crystallization, the phase transition from a to beta-CdS took place. STEM microscopy clearly shows the morphological change of as-deposited and annealed CdS thin films.