Reported herein is the effect of dispersion of a fixed amount of 0.5% (wt/wt) ZnO nanoparticles (NPs) in a nematic (E7) liquid crystal (LC) mixture. Dispersion of ZnO NPs results in a significant improvement in electro-optical and dielectric parameters of the nematic mixture. Comparative analysis of undoped and NP-dispersed samples shows a reduced threshold voltage with better transmittance without compromising dielectric permittivity characteristics. In addition, an increase in the contrast ratio, birefringence, alternating-current conductivity and band gap was observed after dispersion of ZnO NPs in LCs. A polarized optical microscopic study of the NP-dispersed sample substantiates a slight increase in nematic-isotropic phase transition temperature of LCs.