Electrical and optical properties of hydrothermally grown ZnO crystal, as well as structural changes at its surface have been investigated before and after irradiation by pulsed Nd:YAG laser. The spreading resistance measurements have shown a monotonous increase of conductivity by three orders of magnitude when the laser intensity I has been varied from zero to 290 MW/cm2. The PL spectra have revealed an increase of concentration of Zn interstitials at the surface after irradiation by I = 3.5 MW/cm2. Formation of Zn nanoparticles on the crystal surface has been observed at I > 290 MW/cm2. The study of surface structure at I = 315 MW/cm2 has shown that these Zn nanoparticles tend to transform into ZnO nanoparticles after an irradiation by more than 2 laser pulses. A theoretical model of thermal generation and redistribution of point defects has been elaborated to explain the origin of experimentally observed n-type conductivity. According to this model and experimental facts, the n-type conductivity originates from Zn interstitials, which are moved to the crystal surface by large temperature gradient during the laser processing. As a result, Zn-rich surface layer is formed and Zn nanoparticles grow, which are later oxidized into ZnO nanoparticles. We have shown a possibility to control the size distribution of these nanoparticles by choosing appropriate intensity and number of laser pulses.