The reversible transition of wurtzite to rock salt phase under pressure is well reported in literature. The cubic phase is unstable under ambient conditions both in the bulk and in nanoparticles. This paper reports defect-induced stabilization of cubic ZnO phase in sub 20 nm ZnO particles and explores their optical properties. The size reduction was achieved by ball milling in a specially designed mill which allows a control of the milling temperature. The process of synthesis involved both variation of milling temperature (including low temperature similar to 150 K) and impact pressure. We show that these have profound influence in the introduction of defects and stabilization of the cubic phase. A molecular dynamics simulation is presented to explain the observed results. The measured optical properties have further supported the observations of defect-induced stabilization of cubic ZnO and reduction in particle size.