We analysed the variation and effect of oxygen vacancies on the structural, dielectric and magnetic properties in case of Mn (4%) and Co (1, 2 and 4%) co-doped ZnO nanoparticles (NPs), synthesized by chemical precipitation route and annealed at 750 °C for 2 h. From the XRD, the calculated average crystallite size increased from15.30 ± 0.73 nm to 16.71 ± 012 nm, when Co content is increased from 1 to 4%. Enhancement of dopants (Mn, Co) introduced more and more oxygen vacancies to ZnO lattice confirmed from EDX and XPS. The high-temperature annealing leads to reduction of the dielectric properties due to enhancement in grain growth (large grain volume and lesser number of grain boundaries) with the incorporation of Co and Mn ions into the ZnO lattice. The electrical conductivity of the Mn doped and (Mn, Co) co-doped ZnO samples were enhanced due to increase in the volume of conducting grains and charge density (liberation of trapped charge carriers in oxygen vacancies and free charge carriers at higher frequencies). The Mn-doped and (Mn, Co) co-doped ZnO NPs show ferromagnetic (FM) behaviour. The saturation and remnant magnetizations (Ms and Mr) elevates from (0.235 to 1.489) × 10−2 and (0.12 to 0.27) × 10−2 emu/g while Coercivity (Hc) reduced from 97 to 36 Oe with enhancement in the concentration of dopants in ZnO matrix. Oxygen vacancies were found to be the main reason for room-temperature ferromagnetism (RTFM) in the doped and co-doped ZnO NPs. The results show that the enhanced dielectric and magnetic properties of Mn doped and (Mn, Co) co-doped ZnO is strongly correlated with the concentration of oxygen vacancies. The observed enhanced RTFM, dielectric properties and electrical conductivity makes TM doped ZnO nanoparticles suitable for spintronics, microelectronics and optoelectronics based applications.