Doping of the nanocrystalline semiconductor ZnO with the donor In-111 was achieved by the incorporation of In-111 atoms during the growth process followed by a hydrothermal treatment at 473 K. The incorporation of In-111 on substitutional Zn sites was shown by the perturbed gammagamma angular correlation technique. The structural quality of nanocrystalline ZnO with a mean grain size of 11 nm is significantly improved by annealing at 473 K, as revealed by x-ray diffraction, transmission electron microscopy, optical absorption measurements, and photoluminescence spectroscopy. It is shown that the incorporation of In-111 on undisturbed Zn sites in nanocrystalline ZnO seems to be supported by the onset of crystal growth and by the removal of intrinsic defects. (C) 2003 American Institute of Physics.