Nanocrystalline tungsten oxide (WO3) films were grown by reactive magnetron sputter-deposition. The structure and optical properties of WO3 films were evaluated using grazing incidence x-ray diffraction and optical spectroscopic measurements. The effect of ultramicrostructure was significant on the optical characteristics of WO3 films. The band gap decreases from 3.25 to 2.92 eV with increasing grain-size from similar to 9 to 50 nm while the films exhibit a transition from monoclinic to tetragonal phase. A direct microstructure-property relationship found suggests that tuning properties of WO3 films for desired applications can be achieved by tuning the conditions and controlling the phase.