The Raman and photoluminescence (PL) spectra of nanocrystalline zinc oxide produced by mechanochemical synthesis were measured using a pulsed nitrogen laser (337.1 nm) and xenon lamp (360 nm) as excitation sources in PL measurements and a cw Nd:YAG laser in Raman measurements. PL was observed in the range 400–800 nm. The Raman spectrum of nanocrystalline (90 nm) ZnO was compared to that of coarsegrained ZnO. The Raman bands of nanocrystalline zinc oxide were found to be shifted to lower frequencies and broadened. Laser radiation was shown to cause local heating of zinc oxide up to 1000 K, resulting in photoinduced formation of zinc nanoclusters. Mixtures of zinc oxide and sodium chloride powders are heated to substantially lower temperatures. Under nitrogen laser excitation, the green PL band (535 nm), characteristic of bulk ZnO, is shifted to longer wavelengths by 85 nm. The results are interpreted in terms of light confinement in zinc oxide microclusters consisting of large number of nanocrystallites. The photoinduced processes in question may be a viable approach to producing metal-insulator structures in globular photonic crystals, opals, filled with zinc oxide.