By means of experimental and ab initio investigations, we report on the cubic phase stability of Cu doped zirconia (ZrO2) at room temperature, and further characterize its structural, optical and magnetic properties. Various compositions of Zr1−xCuxO2 (0.01 ⩽ x ⩽ 0.25) nanocrystallites of average size ∼16 nm were synthesized using co-precipitation technique. Thermal analysis and kinetics of crystallization revealed that the cubic phase at ambient temperature can be stabilized by using a critical calcination temperature of 500 °C for 8 h in air and a critical composition of . For x < xc, some undigested monoclinic phase of ZrO2 exists together with the cubic structure. However, for x > xc, the monoclinic CuO emerges as a secondary phase with shrinkage of unit-cell volume with increasing the Cu content. At x = 0.05 and 500 °C calcination temperature, we observe a high degree of cubic crystallinity which breaks down into monoclinic phase with increasing calcination temperature beyond 550 °C. Electron magnetic resonance studies provide evidence for the substitution of Cu2+ (2D5/9,3d9) ions at Zr4+ sites with g, g and average ga = ( + 2)/3 ∼ 2.1. The temperature dependence of magnetic susceptibility measurements from 2 K to 300 K exhibits Curie–Weiss behaviour whose analysis using ga = 2.1 and spin S = 1/2 yields x = 0.028 and x = 0.068 for the nominal x = 0.05 and x = 0.20 samples, respectively. This magnetic analysis confirms the findings from x-ray diffraction that only a part of Cu is successfully doped into cubic phase of Cu-doped ZrO2. The optical bandgap decreases with increasing x, which is due to the emergence of Cu-d states at Fermi-level near the valence bands, thus making Cu-doped zirconia a hole doped (p-type) semiconductor.