We report on the structural, micro-structural and magnetic properties of Zn1−xCoxO (0≤x≤0.1) system. Electron probe micro-structural analysis on 5% Co doped ZnO indicates the presence of segregated cobalt oxide which is also confirmed from the Co 2p core level X-ray photoelectron spectrum. The presence of oxygen defects in lower percentage of Co doped ZnO (≤5%) enhances the carrier mediated exchange interaction and thereby enhancing the room-temperature ferromagnetic behaviour. Higher doping percentage of cobalt (>5%) creates weak link between the grains and suppresses the carrier mediated exchange interaction. This is the reason why room temperature ferromagnetism is not observed in 7% and 10% Co doped ZnO.