ZnO nanocrystals doped with Nd, Gd, and Er were synthesized using a soft chemical process in ambient atmosphere. Pseudospherical and hexagonal nanocrystals (NC) of the wurtzite phase with a mean size of (7.4 ± 1.7) nm were obtained. The presence of rare earth (RE) dopants was confirmed by X-ray fluorescence (XRF) spectroscopy. The ZnO nanocrystals exhibited simultaneously narrow excitonic- and broad trap/surface-related photoluminescence (PL), both of which were affected by doping with RE atoms. Doping reduced the total PL intensity, suppressing the excitonic emission by a greater extent than the broad band PL. Also, doping resulted in a blue shift of the trap/surface-related emission, while the energy of the excitonic peak remained unchanged. Resonant Raman spectra additionally confirmed the wurtzite phase of ZnO NCs and revealed a shift of the A1-LO mode towards lower frequency upon doping that could be caused by the mass effect of RE atoms, point defects, and increases in charge carrier concentration. Fitting of the spectra with Voigt profiles showed better results with two surface optical (SO) phonon modes that were previously theoretically predicted for the wurtzite ZnO phase. The influence of RE doping on PL and Raman spectra can be explained by the incorporation of RE ions into the ZnO nanostructures, where the dopants act as non-radiative defects.