Thermal annealing of sputtered InGaZnO4 thin films was studied as a function of annealing ambients under controlled partial pressures of oxygen and water vapor. Water vapor is shown to be critical for obtaining high performance devices with performance improving at water vapor levels substantially higher than normally present in air. The optimized performance of non-reactive sputter fabricated IGZO devices was obtained with post-annealing in air with a 4.5 Torr water vapor pressure. We propose that, in the post-annealing process, water vapor plays a key role due to its small size and high diffusivity, compared to molecular oxygen, allowing it to more easily compensate oxygen vacancies in the IGZO matrix. iii