Nickel oxide is a versatile p‐type semiconducting oxide with many applications in optoelectronic devices, but high doping concentrations are often required to achieve necessary electrical conductivity. In contrast to many other transparent oxide semiconductors, even moderate doping levels in NiO can lead to significant optical absorption in the visible spectral range, limiting the application range of the material. This correlation has been reported extensively in the literature, but its origin has been unknown until now. This work combines experimental data on optical properties from a variety of NiO samples with results from hybrid density functional theory calculations. It shows that strong electron–phonon interaction leads to a significant blueshift (0.6–1 eV) of electronic transitions from the valence band maximum to defect states by light absorption with respect to the thermodynamic charge transition levels. This essentially renders NiO a narrow‐gap semiconductor by defect band formation already at moderate doping levels, with strong light absorption for photon energies of approximately 1 eV. The calculations are also shown to be fully consistent with experimental data on defect‐related light emission in NiO.