Correlation between oxygen vacancies and magnetic property in the as-deposited and annealed (In0.93Fe0.07)(2)O-3 films has been investigated by X-ray diffraction, magnetization measurement, X-ray absorption near-edge structure and extend X-ray absorption fine structure. Magnetic measurement reveals that clear room temperature ferromagnetism is observed for the as-deposited film, in which the doped Fe ions substitute for In sites of the In2O3 lattice and Fe-related secondary phases or clusters as the source of ferromagnetism is safely ruled out. After high-temperature annealing in air, the crystalline structure of film and occupation sites of Fe ions keep unchanged, whereas the magnetic property has a dramatic decrease. Based on X-ray absorption near-edge spectroscopy analysis and multiple-scattering theoretical calculations, it is found that the content of oxygen vacancy of film remarkably decreases, even disappears by annealing in air, which resulting in greatly decreasing the ferromagnetism. These results further provide strong evidence that the oxygen vacancies play an important role in activating the ferromagnetic interactions in Fe-doped In2O3. (C) 2013 Elsevier B.V. All rights reserved.