The use of ZnO bulk and especially nanolayer and nanowire structures for novel device applications has led to a renewal of interest in high-electron-density processes in ZnO, such as those occurring during lasing in ZnO. Using a pump-probe reflectometry technique, we investigate the ultrafast exciton dynamics of bulk ZnO under femtosecond laser excitation close to lasing conditions. Under intense excitation by 266-nm femtosecond (fs) pump pulses, the exciton resonance becomes highly damped and does not recover for several picoseconds. This slow recovery indicates a significant screening of the Coulomb interaction. Even below the lasing thresholds typically found for ZnO nanolayers and nanowires, we observe damping of the exciton resonance for several picoseconds, which indicates that the primary mechanism for lasing in ZnO induced by femtosecond laser pumping is electron-hole plasma recombination.