SrZrO3 perovskite (SZP) was synthesized using gel-combustion route and characterized systematically using X-ray diffraction and time-resolved photoluminescence techniques. A detailed analysis of the optical properties of Tb3+ ions in SrZrO3 was performed to correlate them with the local environment of the lanthanide ions in this perovskite. Photoluminescence (PL) spectroscopy showed that emission spectrum consists of host as well as Tb3+ emission indicating the absence of complete host-dopant energy transfer. On the basis of emission spectrum and PL decay study it was also observed that Tb3+ is not homogeneously distributed in SrZrO3 perovskite; rather, it is occupying two different sites. It is corroborated using extended X-ray absorption fine structure studies that Tb3+ is stabilized on both six-coordinated Zr4+ and eight-coordinated Sr-2 site. The energies calculated using density functional theory (DFT) indicates that Tb occupation in Sr site is energetically more favorable than Zr site. The analysis of valence charge distribution also substantiated our structural stability analysis of site selective Tb doping in SrZrO3. Time-resolved emission spectroscopy is employed to elucidate the difference in the spectral feature of Tb3+ ion at Sr2+ and Zr4+ site. DFT-calculated density of states analysis showed that energy mismatch of Tb-d states with Zr-d and O-p states of SZP makes the energy transfer from host SZP to Tb3+ ion difficult.