The metastable solid solubility extension of CoO in ZnO (wurtzite) was investigated in precursor-derived powders as well as in thin films grown on sapphire substrates by pulsed laser deposition. A maximum solubility of 30% Co2+ in ZnO was achieved in the powders. Transmission electron microscopy (TEM) of the films revealed them to have grown epitaxially and retained up to nearly 40% CoO in solid solution, but some Co2+ precipitated as rock-salt. The temperature dependence of the metastable solubility limit in the ZnO–CoO system was assessed and is discussed in terms of the relevant thermodynamic factors. The magnetic properties of n-type conductive Zn0.79Co0.2Al0.01Ofilms were studied, yielding evidence of a ferromagnetic phase with a TC of 25 K and a second, magnetically ordered, phase with positive exchange and arguably a TC of ∼250 K. Connections between the properties and microstructural observations in high resolution TEM are proposed.