Nanocrystalline ZnO thin films were successfully deposited by a simple and inexpensive solution growth technique. Photoluminescence (PL) and liquefied petroleum gas (LPG) sensing properties were investigated. Films were found to be uniform, pinhole free, and well adherent. As deposited and heat treated (at 673 K for 2 h) films were characterized by XRD, SEM, and EDAX. The dc electrical resistivity and LPG sensing property were measured. The change in morphology, from spherical particle to rod-like, was observed after air annealing. XRD results revealed that the obtained films were nanocrystalline and had a hexagonal wurtzite structure. The absorption edge was found to be at around 366 nm for the as-deposited film and 374 nm for the annealed film. The band gaps were found to be 3.29 and 2.9 eV for the as-deposited and annealed films, respectively. PL spectra of ZnO thin films showed strong peak at 384 nm, which corresponds to near band edge emission (UV emission) and a relatively weak peak at 471 nm. Further, the annealed film was used for detection of LPG in air. Maximum response was observed at 673 K. The maximum sensitivity of sensor was found to be 4.5 for 0.6 vol.% LPG. Sensing response got saturated after 0.6 vol.% of gas concentration. A possible mechanism of LPG sensing has been explained.