The electronic, magnetic, and optical properties of Er-doped ZnO were studied using the density functional theory within the generalized gradient approximation plus U. Three defect configurations of substitution of Zn by Er with/without O or Zn vacancy were considered. The electronic and magnetic results show that Er doping has no effect on the ZnO band edge properties. The Er atom induces 3.0 μ_B atom-like magnetic moments by its 4f electrons and makes no contribution to the host ZnO. The O vacancy in Er-doped ZnO induces a defect state in the band gap, but shows no spin polarization. For the case of Zn vacancy in Er-doped ZnO, however, the unpaired 2p electrons at the ligand O atom induce a defect state in the conduction band edge and obtain a 1.0 μ_B magnetic moment. This result is consistent with the experimental data. Finally, the optical properties of Er-doped ZnO are calculated. Our results explained the experiments and show that Er-doped ZnO should be a good spin optoelectronic material and useful for understanding the mechanism of the room-temperature ferromagnetism properties in ZnO.