The structural and magnetic properties of ZnO (0001) single crystals implanted with 200keV Gd ions up to a fluence of 5×1015cm−2 and subsequently annealed at 800°C in various atmospheres were studied. The chemical composition and concentration depth profiles of ion-implanted layers were characterised by Rutherford Back-Scattering spectrometry (RBS) and compared to SRIM simulations. The as-implanted Gd depth profiles were found to be broader than those simulated by SRIM, but the projected range coincided well with that simulated. After annealing at 800°C, the depth profiles became narrower. The structural changes in the layers modified by ion implantation and subsequent annealing were characterised by RBS channelling. The annealing led to partial recrystallisation and a decrease in the number of Gd atoms situated in substitutional positions. Raman spectroscopy showed that the point defects in Zn and O vacancies had been created by implantation and that these defects are most effectively cured after annealing in oxygen atmosphere. AFM analysis was used to determine the surface-morphology changes after the implantation and annealing procedures. The as-implanted samples exhibited ferromagnetism persisting up to room temperature. The annealing procedure led to paramagnetic behaviour, probably caused by the formation of gadolinium clusters.