In-Situ Sol-Gel synthesis route was adopted for preparation of nanocrystalline $ZnAl_2O_4$ dispersed in $SiO_2$ matrix for potential application as a refractory material. The gels of composition 5%$ZnO$–6%$Al_2O_3$–89%$SiO_2$ were developed at a temperature of $298\ \text{K}$ by using tetraethyl orthosilicate, zinc nitrate, aluminium nitrate and ethyl alcohol as precursors. The transparent gels were converted to xerogel by controlled drying at $313\ \text{K}$ and subsequently to crystalline phase by heating at $1273\ \text{K}$. The structure and thermal behavior of the nanopowders was characterized by TGA, DSC, XRD, and FTIR. The crystallite size measured by AFM was in the range 23 – 28 nm and the mean size calculated using Scherrer’s equation was 29 nm.