Electro-exploding wire (EEW) technique was employed to prepare ZnO and Au-ZnO hybrid nanoparticles. Average size of the prepared ZnO nanoparticles is found to be 3.8 nm and uniform throughout. These ultrafine ZnO nanoparticles are found to agglomerate around the highly surface active Au nanoparticles. It also acts as a stabilizer for the Au nanoparticles by avoiding self agglomeration. The hybrid nanocrystals show strong crystallinity of face-centered cubic and hexagonal wurtzite structure of gold (Au) and zinc oxide (ZnO), respectively. Presence of Au3Zn in pristine sample is a clear indication of a strong interaction between ZnO and Au systems. The hybrid system shows strong enhancement in the ZnO Raman signals and quenching in the visible Photoluminescence (PL) emission. Energy-dependent PL analysis shows the dominance of the surface defects over the bulk contribution in these ultrafine ZnO and Au-ZnO hybrid nanostructures.