ZnO:Al thin films with Al incorporation of 0-20 at.% were deposited through the sol-gel technique. Such a film undergoes a significant microstructure development, from columnar to granular structures and then nanorod arrays with increasing Al content. The important role of Al incorporation level in the microstructure evolution was determined using scanning electron microscopy, x-ray photoelectron spectroscopy and transmission electron microscopy. At low Al level, the transition from columnar to granular grains can be attributed to the coarsening barrier resulting from the introduction of Al into the matrix. However, oriented structures of ZnO nanorod arrays are formed at a high Al level. TEM investigation reveals that a nanorod with smooth morphology at the top and rough morphology at the bottom has a single-crystalline wurtzite structure, which is the aggregation of nanoparticles of a few nanometers in size formed through the orientation attachment mechanism followed by epitaxial growth on the aggregated particles. Finally, the physical properties of the ZnO films with different degrees of Al concentration are discussed. Such detailed microstructure studies may aid the understanding of the doping effect process on the growth of a film, which is essential to altering its physical or chemical properties.