Arsenic tri-sulphide ͑As 2 S 3 ͒ thin film waveguides have been used successfully as nonlinear optical devices for all-optical signal processors. For such devices, low propagation loss is vital if high performance is to be obtained. In this study, thermal annealing was employed not only to stabilize the physical properties of the films, but also to reduce the sources of light attenuation in the as-deposited material. Here we investigated heat-induced changes to the microstructure and optical properties of As 2 S 3 thin films and, based on this information, determined the best annealing conditions. The refractive index of the films rises with annealing due to thermal densification and increased heteropolar bond density. The growth of surface roughness and thermal stress in the film, however, limits the annealing temperature to ϳ130 °C. We fabricated and analyzed waveguides produced from as-deposited and annealed films and found that the propagation loss of the guides dropped by ϳ0.2 dB/ cm as a result of appropriate annealing. Rayleigh scattering and absorption from defects associated with phase separation, homopolar bonds, voids, and dangling bonds in the as-deposited film are shown to contribute to the higher light attenuation in unannealed films.