The influence of sol-gel auto combustion synthesis conditions on the phase purity and microstructure of ZnFe2O4 (ZnO•Fe2O3) nanopowders was studied. The phase composition was determined by X-ray diffraction and the particle size measured by scanning electron microscopy. It was found that the external conditions of the auto combustion reaction affect the phase purity of the synthesized material. Combustion of a xerogel layer on a hot plate forms monophasic spinel zinc ferrite with a particle size ~20 nm. Practical use of synthesized ZnFe2O4 nanopowders as gas sensors with reversible response-recovery behaviour to ethanol is demonstrated.