The spectral and nonlinear optical characteristics of nano ZnO and its composites are investigated. The fluorescence behaviour of nano colloids of ZnO has been studied as a function of the excitation wavelength and there is a red shift in emission peak with excitation wavelength. Systematic studies on nano ZnO have indicated the presence of luminescence due to excitonic emissions when excited with 255 nm as well as significant contribution from surface defect states when excited with 325 nm. In the weak confinement regime, the third-order optical susceptibility increases with increasing particle size and annealing temperature. ZnO nanocomposites exhibit negative nonlinear index of refraction which can be attributed to two photon absorption followed by weak free carrier absorption. The self assembled films of ZnO exhibit saturable absorption due to saturation of linear absorption of ZnO defect states and electronic effects. ZnO based nanocomposites are potential materials for enhanced and tunable light emission and for the development of nonlinear optical devices with a relatively small optical limiting threshold.