Tensile creep behavior of the Zr-2.5Nb alloy has been studied through tests under constant load (stress range ~ 137–371 MPa) between 275 and 375 °C. The minimum creep rate of the alloy is found to vary with applied stress and temperature following a power-law relation. The values of stress exponent (n) obtained in the range of 5.3–6.8 in the temperature interval of 300–375 °C; whereas it is calculated as 1.2 and 7.0 under low and high stresses, respectively at 275 °C. The apparent activation energy of creep (QC) and stress exponent have been determined by analyzing the experimental data. The obtained QC (~198.5 ± 10.7 kJ/mol) is found to be higher than the lattice self-diffusion activation energy of pure zirconium (113 kJ/mol). Using this value, stress exponent ~5.6 ± 0.23 is obtained by the temperature-compensated power law. Microstructural characterization by transmission electron microscopy (TEM) with energy dispersive spectroscopy (EDS) analysis has confirmed coarsening of β-(Nb, Zr) precipitates with compositional changes during creep. The dislocation-precipitate interaction as evidenced by TEM observations is considered to be the origin of threshold stress, which decreases with increasing temperature. Considering the threshold stress, true activation energy of creep (Qt) and true stress exponent (nt) are found as ~160.4 ± 6.9 kJ/mol and ~4.8 ± 0.22, respectively. Analysis of creep data has confirmed the role of dislocation climb as the rate-controlling mechanism, along with validity of Monkman-Grant and modified Monkman-Grant relations. Scanning electron microscopy (SEM) of creep fracture surfaces has revealed evidence for prominent ductile fracture. Further, the obtained creep damage tolerance factor value of 1.9, indicating the predominance for cavitation during creep.