Synthesis of silver-doped zinc oxide (ZnO:Ag) nanoparticles through precipitation method has been reported. The synthesis was conducted at room temperature and no subsequent thermal treatment was applied. ZnO nanoparticles were characterized by X-ray diffraction (XRD), transmission electron microscopy (TEM), X-ray photoelectron spectroscopy (XPS), fourier transmission infrared spectroscopy (FTIR), and ultraviolet-visible (UV–Vis) spectroscopy. Detailed crystallographic investigation was accomplished through Rietveld refinement. The effect of silver content on structural and optical properties of resultant ZnO nanoparticles has been reported. It was found that silver doping results in positional shifts for the XRD peaks and the absorption band edge of ZnO. These were attributed to the substitutional incorporation of Ag+ ions into Zn2+ sites within the ZnO crystal. In addition, higher silver incorporation resulted in smaller size for ZnO nanoparticles. The photocatalytic activity of the ZnO:Ag nanoparticles was also determined by methylene orange (MO) degradation studies and compared to that of undoped ZnO. Improved photocatalytic activity was obtained for ZnO:Ag nanoparticles. It has been shown that an optimum amount of silver dopant is required to obtain maximum photocatalytic activity.