Aims: To develop a simple and cost effective synthetic strategy for the preparation of Fe substituted ZnO nanoparticles. Background: The optoelectronic, electrical, dielectric, optical and magnetic properties of nanocrystalline transition metal substituted ZnO are being explored worldwide for a variety of applications in optoelectronic devices, solar cells, transparent thin film transistors, ultraviolet photodetector, piezoelectric devices, light emitting diodes as well as in the biomedical field. Fe substituted ZnO nanoparticles are being looked upon as promising material in dilute magnetic semiconductor system. Objective: To establish chemical identity and purity in order to ensure the complete substitution of Fe3+ in ZnO lattice and study the effect of Fe substitution on dielectric, electrical and photocatalytic behavior of ZnO nanoparticles. Methods: The nearly spherical ZnO and Fe substituted ZnO nanoparticles were synthesized at a low temperature via solution combustion synthesis employing metal nitrate and sucrose. Results: The powder X-ray diffraction measurement has revealed the monophasic character and complete substitution of Fe in the wurtzitic ZnO lattice. The lattice constants and aspect ratio of Fe substituted ZnO were nearly constant and comparable to that of pristine ZnO. The average crystallite size was found to decrease with increasing Fe substitution. SEM images revealed porous spongy network like morphology. TEM measurements revealed a nearly spherical particle with narrow size distribution between 10 nm - 25 nm. Conclusion: The dielectric constant and dielectric loss decrease upto x = 0.04 and increases with further increase in Fe concentration. The lower value of dielectric loss in the higher frequency region indicates the less lossy nature of Fe substituted samples. AC conductivity behaviour suggests small polaron hopping type of conduction mechanism. The RT DC resistivity was found to decrease with increasing Fe substitution. Pristine ZnO displayed very high degradation efficiency for photodegradation of MB dye. The photodegradation efficiency was found to decrease considerably with increasing Fe substitution.