SummaryIn this paper, we present synthesis of amino acids (l‐arginine and l‐alanine) assisted surface modification of ZnO nanoparticles (NPs) using chemical precipitation method. Study emphasizes the utility of l‐arginine over l‐alanine in the synthesis process and ZnO NPs with average particle size of 18 nm have been successfully obtained using l‐arginine. Structural properties were evaluated using powder X‐ray diffraction (XRD) pattern, energy dispersive X‐ray spectroscopy (EDAX) and transmission electron microscopy (TEM) that confirmed the purity, surface morphology and hexagonal wurtzite crystal structure of ZnO NPs. Linear optical studies using ultraviolet‐visible (UV‐vis) spectroscopy and Fourier transform infra‐red (FT‐IR) spectroscopy indicated the blue shift of excitons absorption wavelength and surface modification by amino acids. Blue shifting is more prominent for l‐arginine and optical band gap of 3.48 eV has been achieved in the present case. Third order nonlinearity (nonlinear refraction and absorption) of ZnO NPs embedded in polyvinyl alcohol (ZnO‐PVA colloidal suspension) was studied by Z‐scan technique at wavelength 632.8 nm in continuous wavelength regime which shows negative nonlinearity with self‐defocusing effect. Large value of n2 and β were obtained in case of ZnO NPs passivated by l‐arginine and effect was attributed to thermal lensing. Thermally stimulated third order nonlinear susceptibility (x(3)) for ZnO‐PVA colloids have also been calculated and presented.