A systematically prepared set of ITO layers for solar cell applications has been analyzed by spectroscopic variable angle ellipsometry in order to trace the dependence of free carriers’ distribution along the film depth as a function of film thickness as well as its change upon annealing. Samples were deposited on silicon substrates with various thicknesses in steps of approximately 10–20 nm. This set was duplicated and these samples were annealed, so that for each thickness an as-deposited and an annealed sample is available. Conventionally measured electrical conductivity and morphological properties (AFM measurements) of the films have been compared with the optical constants’ inhomogeneity, i.e. material properties along the film thickness modelled by variable-angle spectroscopic ellipsometry. The obtained results show that the optical as well as electrical properties of thin ITO films prepared by pulsed DC sputtering are depth dependent. For the deposition conditions used a well-determined reproducible non-uniform distribution of free carriers within the film thickness was determined. In particular it has been found that the majority of free carriers in as-deposited ultra-thin ITO films is concentrated at sample half-depth, while their distribution becomes asymmetric for the thicker films, with a maximum located at approximately 40 nm depth. The distribution of free carriers in annealed samples is qualitatively different from that of as-deposited layers.