Abstract Catalytic and sensing performance of ZnO/Ag nanocomposites greatly depends on the synthesis method used for its production, presenting both challenges and opportunities for optimization. A polymer-network gel process is one of the promising techniques that enables cheap and efficient synthesis of photoactive ZnO/Ag nanocomposites. However, the mechanisms responsible for the formation of ZnO/Ag interfaces are not completely understood, and the photocatalytic efficiency of the ZnO/Ag nanocomposites produced by a simple gel process is not sufficient. In this paper we describe a comparative study on the one- and two-step polymer network gel synthesis techniques, and investigate the mechanisms that account for the significant differences in the observed performance of ZnO/Ag produced by these two methods. The ZnO/Ag nanocomposites synthesized by the two-step method exhibit remarkably enhanced photocatalytic efficiency for Methylene blue, Methyl orange, Rhodamine B, Malachite Green and Formaldehyde (HCHO) under UV light irradiation and simulated sunlight. As the gas sensing material, the ZnO/Ag nanocomposites synthesized by the two-step method show the higher sensitivity and better stability and selectivity. The microstructures and optical characteristics of the samples were revealed by X-ray diffraction (XRD), scanning electron microscope (SEM), transmission electron microscope (TEM), X-ray photoelectron spectroscopy (XPS), Raman spectroscopy, ultraviolet visible (UV–vis) spectroscopy, room temperature photoluminescence measurements, and energy dispersive X-ray (EDS) analysis. Samples synthesized by the two-step process possess a more uniform dispersion of Ag nanoparticles, a smaller Ag crystallite size, and a narrower bandgap. Chemically, more oxygen vacancies and hydroxyl radicals are present in the samples synthesized by the two-step process. Jointly, these factors favor enhanced photocatalytic degradation of organic pollutants, and sensitivities of the sensors.