Nanocrystalline zinc peroxide (nano-ZnO2) was synthesized through a hydrothermal process and comprehensively studied using several experimental techniques. Its crystal structure was characterized by X-ray diffraction, and the average crystallite size of 22 nm was estimated by Rietveld refinement. The temperature-dependent local environment around zinc atoms was reconstructed using reverse Monte Carlo (RMC) analysis from the Zn K-edge X-ray absorption spectra. The indirect band gap of about 4.6 eV was found using optical absorption spectroscopy. Lattice dynamics of nano-ZnO2 was studied by infrared and Raman spectroscopy. In situ Raman measurements indicate the stability of nano-ZnO2 up to 250 degrees C above which it decomposes into ZnO and O-2. The obtained experimental results were supported by first-principles density functional theory (DFT) calculations.