Dysprosium-(Dy) and cobalt (Co)-doped zinc oxide (ZnO) nanoparticles with various concentrations have been synthesized by simple chemical precipitation method. X-ray diffraction (XRD), scanning electron microscopy (SEM), transmission electron microscopy (TEM), and energy-dispersive X-ray (EDAX) measurements were conducted respectively for the structural, morphological, and compositional investigation of the sample. XRD analysis indicated that diffraction peaks of all the samples can be indexed to the hexagonal wurtzite structure of ZnO. No secondary phases including Co and Dy ions were detected in the samples even for the highest doping concentrations of Dy. Average particle size is found to be 25-34 nm. Scanning electron microscope and transmission electron microscope analysis revealed that the dopant atoms of Co and Dy are homogeneously distributed in ZnO wurtzite structure. The samples were characterized by EDAX to confirm the expected stoichiometry. In the photoluminescence spectra, Dy co-doped samples show a violet emission along with a broad yellow emission due to the 4 F 9/2 -6 H 15/2 inner shell transitions of Dy 3+ ion. The photoluminescence (PL) enhancement process in Dy co-doped ZnO:Co is mainly due to Dy as a sensibilizer which could effectively enhance the luminescence intensity. Absorption spectra of dysprosium-(Dy) and cobalt (Co)-doped ZnO nanoparticles exhibited enhanced optical absorption in visible region. Magnetization measurements have shown that the particles have room temperature ferromagnetic behavior with relatively high coercive fields which are decreasing with the increase of doping concentration. The analysis of optical and magnetic properties shows that Co-and Dy-doped ZnO nanoparticles are a promising material for DMS application and have potential applications in optoelectronic devices.