We study the structural stability of surfactant coated ZnFe2O4 (ZF) nanoparticles of average particle size 10nm annealed under different environments. The X-ray diffraction studies in oleic acid coated ZF (OC-ZF) show distinctly different phase transitions under different annealing conditions. The OC-ZF is reduced to alpha-Fe/ZnO phase under vacuum while it forms FeO/ZnO under argon whereas the ZnFe2O4 phase remains stable under air annealing. The simultaneous thermo gravimetric analysis (TGA), differential scanning calorimetry (DSC) coupled mass spectra (MS) in OC-ZF under argon atmosphere suggests that the residual carbon removes oxygen from the lattice to reduce the ZnFe2O4 phase into FeO/ZnO during argon annealing. Apart from CO and CO2 gas evolution at high temperature under argon annealing, creation of oxygen vacancies due to the random removal of oxygen under vacuum annealing, leads to direct interaction between Fe-Fe and the formation of metal Fe. It appears that the residual carbon aids the reduction of ZF and the formation of alpha-Fe/ZnO during vacuum annealing. After annealing at 1000 degrees C in vacuum, the magnetization is increased abruptly from 13.8 to 106.5 emu g(-1). In sharp contrast, the air and argon annealed samples show a diminished magnetization of 1 emu g(-1). The field cooled (FC) and zero FC magnetization of vacuum and argon annealed samples exhibit superparamagnetic and spin-glass type behavior respectively. Our results offer possibilities to switch a magnetically inactive material to an active one. (C) 2011 Elsevier B.V. All rights reserved.