Highly mismatched alloys are of substantial interest for composition-dependent bandgap tunability for solar cell applications. Using low-energy ion implantation and subsequent thermal treatment, we have synthesized ZnTe nanocrystals from Te/ZnO bilayer thin films. However, only thermal treatment without ion implantation does not show any ZnTe nanocrystal characteristics that demonstrate the role of defects via ion implantation in nucleation growth. High-resolution transmission electron microscopy measurements confirmed the nanocrystalline growth of ZnTe and ZnTeO3 inside the mixed layer of ZnO and Te. From X-ray diffraction, it has been observed that a critical fluence of ions is required to produce a certain quantity of defects to assist in stoichiometric ZnTe formation. The absorption spectroscopy illustrates dual bandgap in the mixed alloys. Cathodoluminescence spectroscopy confirms two visible emission bands at 2.1 eV and 2.35 eV corresponding to the ZnTe and ZnO defect band along with the near band UV emission of ZnO at 3.26 eV. Such composition-dependent bandgap and light emission tunability from a mixed alloy are suitable for semiconductor device technology and energy harvesting.