In this paper, we present the detailed study of optical and structural properties of Yb implanted single ZnO crystals. Hydrothermally grown wurtzite (0001) ZnO crystals were implanted with 150 keV Yb ions to fluencies of 5 × 10¹⁴ and 1 × 10¹⁵ at/cm². After ion implantation, two different types of annealing were performed: rapid thermal annealing (RTA) and millisecond range flash lamp annealing (FLA). Crystalline quality, damage recovery, and Yb lattice site location were evaluated by the Channeling Rutherford Backscattering Spectrometry (RBS/c). It is shown that independent of the used annealing technique, defects formed in ZnO during ion implantation can be removed. Upon RTA performed at the temperature higher than 800 °C, strong out-diffusion of implanted Yb atoms and precipitation on the surface takes place. Consequently, the degradation of the photoluminescence (PL) efficiency is observed. The diffusion of implanted Yb during millisecond range FLA does not occur for such experimental conditions. Moreover, FLA treatment for 20 ms leads to the formation of single crystalline ZnO layer with Yb incorporated in the substitutional lattice sites. According to RBS/c and PL data, Yb atoms substituted in the Zn sublattice are predominantly in the 2+ oxidation state. The most intensive PL has been observed after annealing at 800 °C for 20 min which is accompanied with the reduction of Yb substitutional fraction and formation of octahedron Yb-oxygen clusters within ZnO.