Industrial-grade Al:ZnO thin films, were annealed by UV picosecond laser irradiation in argon atmosphere. A remarkable increase of both the carrier density and electron mobility was measured, while the optical properties in the 400–1000 nm range did not change significantly. We studied the microstructure of the films, in order to explain the observed macroscopical changes upon ultra-short pulsed laser annealing. The effects of the ps-laser irradiation are shown to be attributed to the formation of defects and a local atomic rearrangement on the sub-nm scale. This interpretation is rigorously based on the cross-referenced analysis of different experimental techniques (i.e. SEM, AFM, positron annihilation, optical spectroscopy, Hall measurements, Raman spectroscopy, XPS and XRD). The results of this study can be used to develop a new, viable, technological processing technique to further improve Al:ZnO electrodes.