We investigated the electrical effects of polyvinylpyrrolidone (PVP), used as a dispersion agent in zinc oxide (ZnO) nanodispersions. We found PVP reduces the high surface conductivity and atmospheric sensitivity. Compared with polymer free ZnO thin films, the nanoparticulate layers with PVP exhibit a smaller density of thermally active charge carriers, a reduced density of trap states, and a Fermi level shift toward the valence band, yielding improved performance, vanishing hysteresis characteristics and reduced atmospheric sensitivity in thin film transistors (TFT). In addition, we discuss the attachment of PVP to the ZnO surface.