ZrO2 nanoparticles were produced by high current electrical arc discharge of zirconium electrodes in deionized (DI) water. A mixture of nanocrystalline ZrO2 monoclinic and tetragonal phase form based on X-ray diffraction (XRD) analysis. Dynamic light scattering (DLS) result indicates that the size of the particles increases by increasing the arc current. Absorption spectroscopy of the samples shows a red shift on absorption edge by increasing the arc current. Band gap of the produced ZrO2 nanoparticles at 10 A arc current corresponds to 5.4 eV, which decreases to 5 eV by increasing the arc current up to 20 A.