Photocurrent and photoconductivity measurements have been used in combination with absorption and magnetic circular dichroism (MCD) spectroscopic measurements to elucidate the mechanism of photoinduced carrier generation in nanocrystalline Co2+:ZnO electrodes. These experiments allowed direct observation of two broad Co2+ charge transfer (CT) bands extending throughout the visible energy range. The lower energy CT transition is assigned as a Co2+ -> conduction band excitation (MLCBCT). Sensitization of this MLCBCT level by (4)A(2) -> T-4(1)(P) ligand-field excitation is concluded to be responsible for the distinctive structured photocurrent action spectrum of these electrodes at ca. 14 000 cm(-1). The higher energy CT transition is assigned as a valence band -> Co2+ excitation (LVBMCT) and is found to have an internal quantum efficiency for charge separation that is approximately four times larger than that of the MLCBCT excitation. The different internal quantum efficiencies for the two CT excitations are related to differences in excited-state wave functions arising from configuration interaction with the 1S excitonic levels of ZnO. Whereas the MLCBCT excited state is best described as a localized Co3+ + e(CB)(-) configuration, the LVBMCT excited state (Co+ + h(VB)(+)) has a 4-fold greater admixture of delocalized excitonic (Co2+ + h(VB)(+) + e(CB)(-)) character in its wave function, a conclusion supported by quantitative analysis of the CT absorption intensities. Practical factors controlling the overall photovoltaic efficiencies of the photoelectrochemical cells, including electrode conductivity and porosity, were also examined.