We report the microstructural and magnetic properties of transition (3d) and rare earth (4f) metal substituted into the A(x):Zn1-xO (A=Mn, Gd and Mn/Gd) nanocrystal samples synthesized by solgel method. The structural properties and morphology of all samples have been analysed using X-ray diffraction (XRD) method and scanning electron microscopy. The impurity phase in the XRD patterns for all samples is not seen, except (Mn/Gd):ZnO sample where a very weak secondary phase of Gd2O3 is observed. Due to the large mismatch of the ionic radii between Mn2+ and Gd3+ ions, the strain inside the matrix increases, unlike the crystallite size decreases with the substitution of Mn and Gd into ZnO system. A couple of additional vibration modes due to the dopant have been observed in Raman spectrum. The magnetic properties have been studied by vibrating sample magnetometer. The magnetic hysteresis shows that Mn:ZnO and Gd:ZnO have soft ferromagnetic (FM) behaviour, whereas (Mn/Gd):ZnO has strong FM behaviour at room temperature (RT). The enhancement of ferromagnetism (FM) in (Mn/Gd):ZnO sample might be related to short-range FM coupling between Mn2+ and Gd3+ ions via defects potential and/or strain-induced FM coupling due to the expansion lattice by doping. The experimental results indicate that RTFM can be achieved by co-substitution of 3d and 4f metals in ZnO which can be used in spintronics applications.