We have investigated the influence of Ag doping on zinc oxide thin films. Pure and Ag doped, preferentially oriented transparent zinc oxide thin films were prepared by sol gel technique on a glass substrate using diethyl amine as a stabilizer. The X-ray diffraction analysis revealed that the films with hexagonal wurtzite type structure were polycrystalline in nature with a preferred grain orientation in the 101 direction. The crystallite sizes decreased from 34 nm to 27 nm after silver doping. Both photoluminescence and optical transmission measurements showed that the band gap increased after the Ag doping. The structure and optical characterization studies clearly indicated the incorporation of Ag in ZnO. Hence, the observed increase in the optical band gap and decrease in crystallite size can be directly attributed to the effect of Ag ion incorporation into the ZnO lattice.