Undoped and Dy-doped ZnO nanoparticles were synthesized by solution combustion technique using urea as fuel. The synthesized nanoparticles were examined by various characterization tools for their structural, optical and photoluminescence properties. All the nanoparticles are found to possess the hexagonal wurtzite structure of ZnO with crystallite sizes in the range of 16–23 nm. The structural parameters viz. lattice constants, bond lengths, bond angles, and lattice strain of the nanoparticles have been evaluated. The high-resolution transmission electron micrographs and selected area electron diffraction patterns confirm the high crystallinity of the nanoparticles. The optical bandgap estimated from the diffuse reflectance spectra using the Kubelka-Munk method is found to be 2.90 eV for the undoped ZnO. A sharp narrow UV emission peak at ∼396 nm originating from the excitonic recombination is observed in the PL spectra of all the nanoparticles. The visible emission peaks in the PL spectra of undoped ZnO are attributed to different native defects, whereas in Dy-doped ZnO nanoparticles, the visible emissions (blue, yellow and red) are assigned to the 4f intrashell transitions in Dy3+ ions. It has been concluded that the solution combustion synthesized 5 mol% Dy-doped ZnO can be a promising material for white luminescence applications.