Thin films of zirconium dioxide were produced by ion-beam sputter deposition onto fused silica substrates. The deposition process involved a Kaufman-type ion source with ion energy of 1100 eV, beam current density 1.5 mA/cm2, and argon to oxygen ratio of 40:60. Raman scattering was used to monitor crystallization. When the zirconia film was thermally annealed in air, it first crystallized into a mixed tetragonal and monoclinic phase at 450 °C. Further heating beyond 900 °C showed a transformation to a cubic phase. The crystalline transformations decreased the film refractive index from 2.2 to 2.0, significantly increased both the optical absorption and scattering, and lowered the optical band gap from 3.8 to 3.2 eV.