Zn1-xNixO (0.01 <= x <= 0.163)/ZnO bilayer thin films have been grown on [0001] oriented Al2O3 substrates using a pulsed Nd:YAG laser. While the ZnO buffer layer is deposited at a substrate temperature of 700 degrees C, Zn1-xNixO films are grown at 400 degrees C under oxygen partial pressure of 0.01 Pa. X-ray diffraction analysis reveals that all the films correspond to wurtzite hexagonal structure similar to ZnO with preferred orientation (c-axis normal to film plane) and c-parameter decreasing with increase in the nickel content ('x'). Evidence has been advanced to suggest i) occupancy of Ni2+ ions on Zn2+ sites (i.e. in the centre of O2- tetrahedra) instead of phase segregation of nickel locally, and ii) strong sp-d exchange interaction between the conduction and localized 'd' electrons of Ni2+ ions. As 'x' increases from 0.01 to 0.163, the optical band gap absorption edge undergoes gradual red-shift from 3.27 to 3.05 eV. The dc and ac transport properties suggest the dominance of hopping conduction in the temperature range of 5-12 K while magnetic characteristics provide evidence of ferromagnetic ordering in films above room temperature. (C) 2008 Elsevier B.V. All rights reserved.