Zirconia nanoparticles (ZrO2-NPs) of size similar to 10nm have been synthesized using hydrothermal method. ZrO2-NP5 annealed at high temperature (400-850 degrees C) exhibits a better crystallinity along with phase transformation. The PL intensity of ZrO2-NPs found to be annealing temperature dependent due to the change in crystallinity and surface defects. The ZrO2-NPS have also been synthesized in the presence of surfactants i.e. sodium dodecyl sulfate (SDS). The presence and interaction of Zr02-NPs with surfactant has been verified using FUR study. Optical studies showed significant reduction in PL intensity of ZrO2-NPS on surface modification. The decrease in PL intensity has been attributed to the passivation of ZrO2-NPS surface defects by surfactant molecules. The outcomes of the study pave the way to explore these ZrO2-NPs for optical sensors. (C) 2014 Elsevier B.V. All rights reserved.