Highly oriented thin films of Al doped ZnO (Al:ZnO) and Cu co-doped Al:ZnO (Cu/Al:ZnO) thin films were successfully deposited by sol–gel spin coating on glass substrates. The deposited films were characterized using X-ray diffraction analysis and found to exhibit hexagonal wurtzite structure with c-axis orientation. SEM images revealed that hexagonal rod shaped morphologies were grown perpendicular to the substrate surface due to repeated deposition process. High transmittance values were observed for pure ZnO compared to Al:ZnO and Cu/Al:ZnO thin films. The band gap widening is caused by the increase of carrier concentration, which is believed to be due to Burstein-Moss effect due to Al and Cu doping. PL spectra of Cu/Al:ZnO thin films indicate that the UV emission peaks slightly shifted towards lower energy side. XPS study was carried out for Zn0.80Al0.10Cu0.10O thin films to analyze the binding energy of Al, Cu, Zn and O. Magnetic measurement studies exhibited ferromagnetic behavior at room temperature, which may be due to the increase in copper concentration in the doped films. The ferromagnetic behavior can be understood from the exchange coupling between localized ‘d’ spin of Cu ion mediated by free delocalized carriers.