Effects of Mn-substitution on magnetic properties of Zn1-xMnxO (MZO) nanoparticles with x= 0.00, 0.03, 0.05 and 0.07 have been investigated along with their local structure. The study on Mn K-edge XANES spectra of MZO reveals that the oxidation state increases by the Mn-substitution, which further implies that MZO exhibits a mixed valence state of Mn3+/Mn4+. The local structure analysis on Mn K-edge EXAFS spectra shows that the coordination number (CN) of Mn reduces by increasing Mn concentration, thus the amount of oxygen vacancy (VO) increases by the Mn-substitution. Interestingly, the magnetization of MZO also tend to increase as the Mn concentration increases. The M(H) curves exhibit linear (paramagnetic) behavior, showing no evidence of room-temperature ferromagnetism. Our results show that the magnetism of MZO is related to the correlation between the Mn magnetic moment and VO.