Undoped, Gd doped, and (Gd, Mn) co-doped ZnO nanoparticles were fabricated via a hydrothermal method and their structural, morphological, optical, and magnetic properties were examined. X-ray diffraction and Raman spectroscopy studies confirmed that the Gd and Mn ions successfully entered the ZnO hexagonal lattice as substitute ions without changing the internal structure of the lattice. Morphology studies revealed that the synthesized nanoparticles were monodisperse and closely hexagonal shaped. The reflectance spectra showed a red shift of the absorption edge in both doped and co-doped samples. The diamagnetic ZnO sample was altered into a ferromagnetic material when doped with Gd ions, but this behavior was suppressed when Mn ions were co-doped into the matrix.