Spectral dependencies of absorption coefficient and persistent photoconductivity in nanocrystalline indium oxide (In2O3) are studied. Nanostructured In2O3 samples with various nanocrystals size are prepared by sol-gel method and characterized using various techniques. The mean nanocrystals size varies from 7–8 nm to 39–41 nm depending on the preparation conditions. Structural characterization of the In2O3 samples is performed by means of transmission electron microscopy and X-ray diffraction. The analysis of ultraviolet – visible absorption spectroscopy shows that nanostructuring leads to the change in optical band gap: optical band gap of the In2O3 samples (with an average nanocrystal size from 7 to 41 nm) is equal to 2.8 eV. We find out the correlation between spectral dependence of photoconductivity and optical properties of nanocrystalline In2O3: sharp increase in photoconductivity was observed to begin at 2.8 eV energy equal to the optical bandgap in the In2O3 samples, and reached its maximum at energies of 3.2–3.3 eV.