The fabrication of ZnO nanoparticles (NPs) was monitored and studied in situ by controlling the plasma parameters of the direct current (DC) arc plasma system, such as the current density and chamber pressure. The optical emission signature of nitrogen was spectroscopically studied using optical emission spectroscopy (OES) techniques, and it showed a dependency on the nitrogen concentration in the ZnO nanoparticles in relation to the output of the ZnO NPs-based homojunction light-emitting diodes (LEDs). The synthesized NPs had a good crystalline quality and hexagonal wurtzite structure, and they were characterized by X-ray diffraction (XRD) techniques and scanning electron microscope (SEM). The photoluminescence properties of the ZnO NPs and the optical and electrical parameters of the LEDs were also analyzed and correlated. The results indicate that the nitrogen dopants act as acceptors in the ZnO NPs and are favored in low plasma temperatures during fabrication. We anticipate that the results can provide an effective way to realize reliable nitrogen-doped p-type ZnO and tremendously encourage the development of low-dimensional ZnO homojunction LEDs.