Nano-sized zinc oxide (ZnO) colloids were prepared by hydrolyzing zinc acetate solution with ammonia (NH3) gas as a volatile catalyst, instead of metal hydroxides such as NaOH and LiOH, which have been used previously. The procedure consists of two major steps: (1) preparing the precursor by reacting zinc acetate with ethanol, and (2) hydrolyzing the precursor to form the colloid. Hydrolysis was performed by bubbling the desired composition of NH3-N-2 gas mixture into the precursor for the desired time in an ultrasonic bath. The hydrolysis conditions required for forming ZnO colloids such as the composition of the NH3-N-2 gas mixture and bubbling Limes are examined. In addition, optical properties such as luminescence and absorption of these ZnO colloids produced via this basic hydrolysis procedure, and the effect of the residual NH, in the suspension on colloidal stability are examined. It is found that a critical amount of dissolved NH, to form nano-sized ZnO particles is existent, and that the Luminescence intensity largely depends on the gas composition and the bubbling time. Residual NH, remaining in the suspension greatly affects colloidal stability, But, it could be easily removed by evaporating ethanol of the solvent under reduced pressure. The resulting ZnO powder could be re-dispersed quickly and completely into ethanol, The luminescence and absorption properties of the re-dispersed colloidal suspension were almost the same as those of the original suspension. Moreover, the redispersed ZnO suspension was absolutely transparent for more than one month at room temperature. In other words, the colloidal stability is remarkably improved.