We have investigated the effects of nitrogen annealing on the structural, electrical, and optical properties of Al-doped ZnO (ZnO:Al) thin films deposited by RF magnetron sputtering at room temperature. From the X-ray diffraction observations, films have highly crystalline structure with a c-axis preferred orientation. The most improvements in the electrical and optical properties of the ZnO:Al films were obtained by nitrogen annealing. The ZnO:Al films exhibited an average optical transmittance of 90-95% in the visible range and a sharp fundamental absorption edge. Spectroscopic ellipsometry (SE) was used to extract the optical constants of thin films. The optical characteristics of ZnO:Al films were modeled using a Tauc-Lorentz based dielectric function. The bandgap energy increased with the increases in nitrogen annealing temperature, which change in accordance with the Burstein-Moss effect, and was consistent with the observed changes in the transport properties.