Differently heat‐treated polycrystalline cadmium oxide (CdO) samples have been studied using room temperature (RT) resistivity, positron annihilation lifetime (PAL) and ultraviolet visible (UV‐Vis) optical absorption measurements. A small increase of the resistivity for 275 °C annealing (with respect to the other samples) and a large reduction of the same for 810 °C annealing have been observed. PAL investigation shows presence of defects, presumably Cd+O divacancy (VCd+O) clusters, in all the samples. Gradual defect recovery takes place with increasing annealing temperature. A clear defect recovery stage has been found above 400 °C annealing from where drastic fall of resistivity occurs. The optical band gaps (direct and indirect) of the 125 °C annealed sample comes out to be 1.89 eV and 0.79 eV. The indirect band gaps of the samples show anomalous variation due to 275 °C annealing which is also consistent with resistivity anomaly. To our knowledge, this is the first positron spectroscopic investigation on the CdO system. (© 2009 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)