Laser-induced fragmentation of indium tin oxide nanoparticles was performed in water by laser irradiation with various laser energies. Fragmentation of the nanoparticles proceeded with increased laser energy. The fragmented nanoparticles showed high transmittance in the visible region and lower transmittance in the ultraviolet and infrared regions. The optical band gap of the fragmented nanoparticles increased with decreasing average particle size. The increase of the band gap was possibly caused by the Burstein-Moss effect due to the increasing concentration of carriers generated by the surface defects of the oxygen vacancies on smaller nanoparticles.