Samples of nanocrystalline ZnO have been prepared and X-ray absorption spectra (EXAFS) have been recorded at the Zn K-edge. Comparison with bulk ZnO shows that the amplitude of the EXAFS is dramatically reduced compared to the bulk polycrystalline sample and this has been attributed to a large fraction of the atoms being situated in grain boundary regions. Quantitative analysis of the data suggests that a model in which coordination numbers, radial distances and Debye-Waller factors were allowed to vary produced the best fit to the data. The nanocrystalline particles were found to be asymmetrical, approximately 50 angstrom in the 100 direction and 30 angstrom in the 002 direction, and the Zn-Zn coordination was reduced from 12 to around 8. Initial gas sensing results show an encouraging response to low ppm concentrations of toluene vapour.