Abstract The normal reflectivity of Ti 4O 7 ( T = 290 K) is measured in the range of 0.1 to 3 eV. The reflectivity shows a minimum which corresponds to the collective resonance of all Ti 3+ valences. The optical absorption as calculated from the diffuse reflectivity of Ti 4O 7 is investigated in the spectral range of 0.5 to 2.5 eV and at temperatures between 10 and 300 K. A broad asymmetrical absorption band with a maximum at about 0.7 eV and an absorption sideband at about 1.5 eV is observed. The overall line shape is explained by the polaronic absorption mechanism. From room temperature down to the metal-insulator transition at T> m ≈ 150 K the total polaronic absorption cross section remains constant. It drops down in the intermediate phase (125–150 K) and then increases with decreasing temperature below the Verwey transition at T v ≈ 125 K. The increasing absorption cross section below T v as well as the shift of the peak position to lower energy is in accordance with the gap opening at ≈ 0.2 eV previously reported (Kaplan et al. ) and is explained by the separation of single polaronic from bipolaronic energy levels. The magnetic susceptibility of Ti 4O 7 is discussed with respect to an exchange pairing mechanism above and below T m . It is suggested that a melting of the bipolaronic state during the metal-insulator transition results in a fluctuating valence bond system above T m .