Zinc oxide (ZnO) nanocrystals mono- and co-doped with nickel/iron were prepared using a facile solvothermal procedure. A significant change in the surface morphology from nanorods to plate-like nanoparticles was observed with an increase in the dopant concentration. The variations of their optical and electronic properties induced by metal dopants were investigated using a combination of characterization techniques and ab initio calculations. It is found that both nickel and iron atoms have been successfully incorporated into the crystal lattice rather than forming a secondary phase, suggesting good dispersion of dopants within the ZnO matrix. Doping with iron has red-shifted the absorption edges of ZnO towards the visible portion resulting in lower band gap energies with increasing dopant concentration. Evidenced by Raman and EPR spectroscopy, the addition of iron has been shown to promote the formation of more oxygen vacancy and crystal defects within the host lattice as well as increasing the free-electron density of the nanomaterial. The DFT plus Hubbard model calculations confirm that low concentration Ni-doping does not induce band gap narrowing but results in localized states. The calculations show that Fe-doping has the potential to greatly improve the optical absorption characteristics and lead to structural deformation, corroborating the UV-Vis, Raman, and EPR spectra.