P-type conductivity in MOCVD grown ZnO was obtained by directional thermal diffusion of arsenic from semi-insulating GaAs substrate. The films were single crystalline in nature and oriented along (002) direction. Ab initio calculations in the framework of density functional theory have been carried out with different chemical states of arsenic in ZnO. Present calculations suggested As-Zn-2V(Zn) defect is a shallow acceptor and results in ferromagnetism in ZnO. The magnetic measurements of the samples indeed showed ferromagnetic ordering at room temperature. X-ray photoelectron spectra confirmed the presence of As-Zn and V-Zn. The core level chemical shift in binding energy of As-Zn indicated the formation of As-Zn-2V(Zn). Diffused arsenic substitutes zinc atom and creates additional zinc vacancies. The zinc vacancies, surrounding the oxygen atoms, result in unpaired O 2p electrons which in turn induce ferromagnetism in the samples. (C) 2015 Elsevier B.V. All rights reserved.