A superior approach is presented to study quantitatively fine structure of C‐doped ZnO nanostructure using transmission electron microscopy (TEM) from which the role of carbon in ZnO crystal to form ferromagnetism is revealed at the first time. Electron diffraction in TEM shows Wurtzite structure in the nanoparticles with lattice parameters (a = 0.327 ± 0.03 nm and c = 0.529 ± 0.04 nm) slightly different from the original structure. Interestingly, the Zn–C bonding with a bonding length of 2.58 Å is experimentally determined using atomic pair distribution function (PDF) calculated from electron diffraction data. Together with other bondings, such as C–C, Zn–O obtained from the PDF, this demonstrates migration of C atoms into ZnO crystal to substitute O vacancies. This is furthermore visualized by high‐resolution TEM imaging and elemental mapping, and strongly supports the proposal of origin of ferromagnetism in the C‐doped ZnO nanoparticles where the s–p and p–p hybridizations formed by C2p–Zn4s, and O2p–C2p orbitals are believed to cause ferromagnetism. The paper presents a superior approach to understand the role of carbon in ZnO to form ferromagnetism. ZnC and CC bonds with the lengths of 2.58 and 1.42 Å, respectively are determined using atomic pair distribution function calculated from electron diffraction in transmission electron microscopy indicating substitution of C for O to form the ferromagnetism via s–p and p–p orbital hybridizations.