This study investigated the characteristics of gadolinium (Gd) and aluminum (Al) co-doped ZnO synthesized by co-sputtering at varying concentrations of Al. FESEM images revealed a morphology containing spherical-hexagonal nanostructures of different sizes based on the amount of Al. The EDS spectra clearly demonstrated the presence of Al, Gd, Zn, and O, confirming the successful incorporation of Gd and Al ions into the ZnO lattice in agreement with XRD profiles, not detecting any secondary phases. The photoluminescence study revealed that doping-induced defect states (oxygen vacancies, zinc vacancies, and zinc interstitial) were responsible for the many characteristic peaks of deep level emission observed in the photoluminescence spectra. Higher Al doping induced changes in magnetic characteristics as reflected in the greater root mean square value (δfrms), and the root mean square phase shift value (Φrms) in MFM analysis, whereas the magnetic correlation length (L) decreases. The incorporation of Al at higher concentrations into Gd-doped ZnO resulted in improved magnetic behavior suggesting the exchange interaction between Gd and Al ions mediated by oxygen vacancies. These results confirm that sufficient Al doping can efficiently improve the properties and magnetic behavior of ZnO-based DMS systems, which could potentially pave the way towards the realization of spin and/or optical based electronic devices.