Hexagonally shaped ZnO nanocrystal thin films were fabricated on sapphire(0001) substrates by laser molecular beam epitaxy. Nanocrystal structure was investigated by atomic force microscopy and transmission electron microscopy. Epitaxial growth of ZnO nanocrystal thin films on sapphire substrates was found to occur in a spiral and grain growth mode. The grain growth mode was interpreted by taking higher order epitaxial relationship of oxygen sublattice units between ZnO and sapphire into account. Nanocrystal size could be tuned from 50 to 200 nm controlling film thickness, growth conditions and stoichiometry of the target. The films having small nanocrystal size of about 50 nm showed excitonic stimulated emission having peak energy of 3.2 eV at room temperature with a very low threshold (24 kW cm). Mode transition from excitonic stimulated emission to electron hole plasma appeared above another threshold (50 kW cm). Well defined Fabry-Perot cavity mode was observed in the emission spectra measured from side edge of the film. It was concluded that the grain boundaries between nanocrystals serve not only as potential barriers confining excitons but also as cavity mirrors. © 1998 Elsevier Science S.A. All rights reserved.