The nanocrystalline ZnO films with highly C-axis orientation and low residual stress of were prepared on ordinary glass substrates with high purity ZnO powder as target. The structure and microstructure of the films before and after annealing were analyzed. The results indicate that except for those sputtered in pure argon atmosphere, the most of as sputtered films are homogeneous and dense, with highly c-axis orientated grains of sizes less than 50 nanometers, but there exists residual stress in the thin film, and it is longer in the ZnO thin films with multi-crystalline orientation and poor crystallization; The C-axis orientated growth of the grain and the degree of crystallization are improved by increasing of oxygen partial pressure; Annealing process is also effective on reducing the residual stress. It has been observed that the residual stress significantly decreases, and crystallization degree is improved, but grain size slightly increases when annealed up to 500 ℃ for 2 hours.