Photoluminescence (PL) of erbium-doped zinc oxide films with nano-sized grains was studied. The films were grown on silicon (100) and fused silica substrates using e-beam evaporation. The evaporating targets used were sintered pellets of ZnO and Er2O3 mixtures with two different Er concentrations. The films were subsequently annealed at 700 °C in air for an hour. PL was measured at two excitation wavelengths, 325 and 488 nm. The 325 nm is used for exciting the host semiconductor ZnO and 488 nm is used for directly exciting Er3+ ions in the ZnO host. Strong Er3+ luminescence of 4S3/2 → 4I15/2 and 4F9/2 → 4I15/2 transitions was observed from annealed film with 4.0 % Er2O3 concentration using either 325 or 488 nm excitation. With 325 nm excitation, the Er3+ luminescence observed is attributed to energy transfer from the excitons in ZnO host to the Er3+ ions doped. The effective energy transfer from ZnO host to the doped Er3+ ions is an essential property for the realization of actual current-injection opto-electronic devices operating at wavelengths of Er3+ emission, for example, at 1.54 μm for the erbium-doped fiber amplifier (EDFA). Our PL results indicate that thermal annealing plays an important role for optically activating the doped Er3+ ions in ZnO nano-crystalline grains of the film.