The relation between particle size and the optical and electrochemical behavior of nanocrystalline ZnO was studied on materials prepared by the thermal decomposition of zinc peroxide. The formation of zinc oxide starts at 180 degrees C and yields particles of characteristic size bigger than 10 nm. Smaller particles (r similar to 2-5 nm) may be prepared at reduced pressure and at a temperature of 150 degrees C. The particle radius of synthesized nanocrystals increases proportionally to synthesis temperature. Regardless of actual particle size, synthesized ZnO samples show cationic disorder, with Zn distributed between 2b and 2a sites. The fraction of "octahedrally" coordinated Zn in 2a position decreases with increasing synthesis temperature. Zn disorder causes a narrowing of band gap, which results in the "red shift" of the absorption edge in the UV-Vis spectra of prepared samples with respect to bulk ZnO. The effect of the disorder on the band gap width is partially compensated by quantum size effects when the characteristic particle size drops below 5 nm. A decrease in particle size results in an asymmetric shift of valence and conduction band edges, which can be assigned to uneven effective masses of electrons and holes in nanocrystalline ZnO. Prepared nanocrystalline samples were (photo)electrochemically active; their activity, however, decreases with particle size.