The present work reports the synthesis of pure and Zr-doped hematite nanoparticles from the thermally induced polymorphic transformation from magnetite nanoparticles. The microstructural phases and parameters of the nanoparticles were investigated with X-ray diffraction. It is found that transformation from magnetite to hematite is delayed with increasing Zr content. The absence of X-ray diffraction peaks related to metallic Zr and its oxide in the doped samples indicates the dopant was uniformly distributed in the host hematite matrix. Fourier transform infrared spectroscopy and diffuse reflectance spectroscopy were carried out to investigate the optical properties of the nanoparticle samples. The decrease in IR absorbance intensity and shifting of the absorption bands to a lower frequency was observed with Zr doping in hematite, indicating a reduction in crystallinity and substitutional doping with the host element, respectively. It was found that the Zr doping improves the visible light absorption and decreases the band gap of hematite nanoparticles. X-ray photoelectron spectroscopy results confirmed the + 4 oxidation state of Zr dopant in the host lattice, and Zr-doped hematite nanoparticles indicated a decrease in octahedral coordination with an increase in tetrahedral coordination of Fe3+ oxidation state. Room-temperature magnetic properties were investigated with the vibrating sample magnetometer. A significant improvement in photocatalytic properties of hematite was found with Zr doping.