We report on the influence of dilute doping combined with the processing conditions on the morphological, structural, chemical states, photoluminescence and magnetic properties of Zn1-xNixO nanopowders. Ni doping changes the ZnO powder morphology from randomly-aggregated nanocrystals to densely-packed nanocrystals arranged in columnar particles, modifies the high-energy-component of O1 s spectrum and increases the modified Auger parameter in XPS, enhances the blue photoluminescence (PL) emission, suppresses the green PL emission and the intensity of the g = 1.997 EPR signal. Ni-ZnO nanostructures show room-temperature ferro-magnetism (implying they can serve as dilute magnetic semiconductors). The saturation magnetization, crystallite size and microstrain increase with the doping level; the c-axis constant and unit cell volume decrease, however, being unexpectedly higher with respect to a (reference) ZnO powder with a relaxed lattice. We demonstrate that the investigated properties were controlled by both (dilute) doping level and donor native defects produced by non-equilibrium (oxygen-deficiency and high rate of) ZnO formation.