Undoped ZrO2nanocrystals were annealed in open air from 100 °C to 1300 °C. X-ray diffraction and transmission electron microscope were used to study the structure change and grain growth. Both the methods reveal that the ZrO2 grain size has very slight increase after annealing up to 900 °C. Positron annihilation measurements reveal a high concentration of vacancy defects which most probably exist in the grain boundary region. Thermal annealing above 500 °C causes recovery of these defects, and after annealing at 1200 °C, most of them are removed. Room temperature ferromagnetism is observed for the sample annealed at 100 °C and 500 °C. The magnetization becomes very weak after the nanocrystals are annealed at 700 °C, and it almost disappears at 1000 °C. It is clear that the intrinsic ferromagnetism in our ZrO2nanocrystals is mostly related with the interfacial defects instead of grain size effects.