Terbium ions were successfully incorporated in nano-sized zinc oxide particles with a doping concentration up to 3% by using a wet chemical route. Four narrow emission peaks of Tb3+ ions and a broad emission band of the surface states on ZnO nano-hosts were observed for all Tb-doped nanoparticles. Relaxation of carriers from excited states of ZnO hosts to rare earth (RE) dopants is disclosed by the fact that the emission intensity of Tb3+ centers increases with increased Tb content at the expense of the emission from surface defect states in ZnO matrix.