Cadmium telluride (CdTe) thin films were deposited by thermal evaporation method under base pressure 2 ×10−5 mbar on corning glass substrate. In this work, we study the effect of cadmium chloride (CdCl2) heat treatment in argon and oxygen (Ar + O2) atmosphere on the structural, morphological and optical properties of CdTe thin films to achieve high quality thin film absorber layer for solar cells applications. The structural characteristics were studied by X-ray diffraction (XRD). The microstructure parameters of the films such as average grain size (Davg ), average lattice strain (εavg ) and dislocation density (_D) have been calculated via XRD line broadening analysis. XRD investigation revealed that, the samples show polycrystalline nature pronounced with cubic zinc blende structure with a strong preferentially (1 1 1) texture orientation. It has been found that the crystallinity of the films enhanced during (Ar + O2) annealing and CdCl2 heat treatment. The surface morphology of CdTe thin films was investigated by field emission scanning electron microscope (FE-SEM). XRD and FE-SEM results of CdCl2 treated films showed recrystallization and progressive increase in grain size. The optical properties of all samples were estimated using UV–vis–near-infrared (NIR) spectrophotometer. The Swanepoel envelope method has been employed to evaluate the various optical parameters of CdTe films such as refractive index and film thickness.