We have studied the effect of Ar annealing on the electrical and magnetic transport properties of Pr0.7Sr0.3MnO3 manganite. It is observed that, with increase in the annealing time there is a progressive decrease in TC and, resistivity, as functions of temperature become broader with the occurrence of two metal-insulator transitions. Electron-spin resonance analysis shows that for the Ar annealed sample, additional lines are present much above TC and the activated intensity behaviour and the paramagnetic linewidth behaviour points to the existence of spin clusters above TC. The metal-insulator transition was found to be percolative in nature with the high temperature transition having a temperature-dependent metallic volume fraction (p) while the low-temperature broad hump could be described by a bond percolation model with temperature independent p. © 2006 Elsevier B.V. All rights reserved.