We have studied the microstructures of lasing and non-lasing ZnO films on sapphire in plan-view and cross-section by transmission electron microscopy (TEM). While ZnO films in general are made up of cloumnar close-packed c-axis misoriented nanocrystals, the misorientation in nonlasing film, typically 5°, is considerably larger than lasing film, typically less than 1°. A rather high density of pinholes or nanotubes is associated with the highly misoriented films. The misorientation between adjacent grains is taken up by grain boundary dislocations. Room temperature lasing films contain a high density of threading boundary edge dislocations, in excess of 1010 cm−2. But faceting in the columnar nanocrystals is not well developed so that the grain boundaries are not clearly visible. Tilting of (0001) lattice planes between grains originating from substrate surface step and growth fault step, however, has been observed in high resolution electron microscopy (HREM) images.