In order to gain insight into the magnetic behaviour of Ni-doped ZnO nanocrystals (NCs) the local structure was rigorously studied by extended x-ray absorption fine structure (EXAFS) along with the magnetic measurements. At low doping level of Ni, local structure remains identical to ZnO NCs with subtle increase in the bond length. EXAFS and the optical absorption measurements indicate valence of Ni to be +2. Undoped as well as Ni-doped ZnO NCs with very low Ni concentration are weakly ferromagnetic. Further increase in doping level yields paramagnetic NCs. The present studies clearly prove that ferromagnetic ordering in NCs is primarily a manifestation of point defects and incorporation of transition metal impurities plays a secondary role.