The application of dynamic in situ ellipsometry to the monitoring of the deposition of transparent indium tin oxide layers by reactive direct-current magnetron sputtering in Ar/02 gas mixtures is described. The dependence of the refractive index and the deposition rate on the discharge power and on the oxidation state of the target show that the state of the target is the essential parameter for the production of indium tin oxide films with the desired properties. The sputter yield of the pure In:Sn alloy exceeds that of the oxide by a factor of about 6. The film growth species in the case of an oxidized target are In2O molecules or oxide clusters rather than metal atoms.