Combustion synthesis was used to synthesise the undoped and Fe3+ ions incorporated ZrO2 nanostructures using Tamarind indica extract. The synthesised ZrO2 nanoparticles with a tetragonal phase and a particle size less than 45 nm were found by structural investigation. Fe doping causes the optical band gap of ZrO2 nanostructures to decrease. Due to the hybridization of the host and dopant orbitals, the energy band gap value of the resulting nanoparticles considerably become smaller (from 5.35 eV to 4.18 eV) towards the visible range. By studying PL measurements of the synthesised samples, it is confirmed that the presence of oxygen vacancies was observed. The size and phase purity of the nanoparticles are responsible for the intriguingly high dielectric constant increase of up to 9.7 × 104 with very little loss following the integration of Fe into the ZrO2 medium. The high value of dielectric constant and uniform nanoparticles produced have applications in high-frequency devices and technologies such as spintronics as multifunctional applications.