Findings are presented from a systematic study of the effects of postdeposition thermal treatment on the optical characteristics of hydrogenated amorphous silicon-oxycarbide (a-SiCxOyHz) materials. Three different classes of a-SiCxOyHz films: SiC-like (SiC1.08O0.07H0.21), Si-C-O (SiC0.50O1.20H0.22), and SiO2-like (SiC0.20O1.70H0.24), were deposited by thermal chemical vapor deposition. The effects of thermal annealing on the compositional and optical properties of the resulting films were characterized using Fourier-transform infrared spectroscopy, x-ray photoelectron spectroscopy, nuclear reaction analysis, and spectroscopic ultraviolet-visible ellipsometry. As the Si-C-O system evolved from a SiC-like to SiO2-like matrix, its refractive index and optical absorption strength decreased, while its optical band gap increased. Thermal annealing between 500 and 1100 °C resulted in hydrogen desorption from and densification of the a-SiCxOyHz films. Concurrently, thermally induced changes were also observed for the optical properties of the films, as evidenced by an increase in film refractive index and an accompanying decrease in optical gap. These changes are analyzed in the context of the underlying physical processes, particularly modifications in the electronic configuration (bonding) and hydrogen desorption mechanisms. Furthermore, based on the observed structural and optical properties of the thermally treated a-SiCxOyHz films, the Si-C-O matrix was employed in the successful development of an Er-doped Si-C-O system with efficient Er excitation and strong room-temperature photoluminescence emission around 1540 nm within a broad (460–600 nm) excitation band. As such, a-Si-C-O represents a material system that provides considerably efficient energy transfer mechanisms at the same Er concentration level than previously investigated Si-based materials.