A novel thermal plasma in-flight technique has been adopted to synthesize nanocrystalline ZnO and carbon doped nanocrystalline ZnO matrix. Transmission electron microscopy (TEM) studies on these samples show the average particle sizes to be around 32nm for ZnO and for carbon doped ZnO. An enhancement of saturation magnetization in nanosized carbon doped ZnO matrix by a factor of 3.8 has been found in comparison to ZnO nanoparticles at room temperature. Raman measurement clearly indicates the presence of Zn–C complexes surrounded by ZnO matrix in carbon doped ZnO. This indicates that the ferromagnetic signature in carbon doped ZnO arises from the creation of defects or the development of oxy-carbon clusters, in the carbon doped ZnO system. Theoretical studies based on density functional theory also support the experimental analyses. ► Synthesis of nanocrystalline ZnO and carbon doped ZnO matrix by inflight thermal plasma reactor. ► Enhancement of ferromagnetism in nanosized carbon doped ZnO in comparison to ZnO nanoparticles. ► Raman measurement indicates the presence of Zn–C complexes surrounded by ZnO matrix. ► Ferromagnetic signature in carbon doped ZnO arises from the development of oxy-carbon clusters. ► DFT supports experimental evidence of ferromagnetism in C doped ZnO nanoparticles.