Electronic absorption, magnetic circular dichroism (MCD), photoconductivity, and valence-band x-ray photoelectron (XPS) spectroscopic measurements were performed on epitaxial Zn1−xMnxO films to investigate the origin of the mid-gap band that appears upon introduction of Mn2+ into the ZnO lattice. Absorption and MCD spectroscopies reveal Mn2+-related intensity at energies below the first excitonic transition of ZnO, tailing well into the visible energy region, with an onset at ∼2.2 eV. Photoconductivity measurements show that excitation into this visible band generates mobile charge carriers, consistent with assignment as a Mn2+/3+ photoionization transition. XPS measurements reveal the presence of occupied Mn2+ levels just above the valence-band edge, supporting this assignment. MCD measurements additionally show a change in sign and large increase in magnitude of the excitonic Zeeman splitting in Zn1−xMnxO relative to ZnO, suggesting that sp-d exchange in Zn1−xMnxO is not as qualitatively different from those in other II-VI diluted magnetic semiconductors as has been suggested. The singular electronic structure feature of Zn1−xMnxO is the presence of this Mn2+/3+ ionization level within the gap, and the influence of this level on other physical properties of Zn1−xMnxO is discussed.