Group Ⅱ-VI and Ⅲ-V highly mismatched alloys are promising material systems in the application of high efficiency intermediate-band solar cell (IBSC), however, the key issues including band engineering of intermediate band still remain challenging. In this study, ZnTe:O alloys have been produced by isoelectric oxygen implantation into ZnTe single crystal, and the influences of implantation on the microstructural and optical properties of ZnTe:O have been investigated in detail. It is found that a proper dose of oxygen ions can lead to a compressive strain in the lattice and induce the formation of intermediate band located on the energy level of ～ 0.45 eV below the conduction band. While a high dose of oxygen ions causes ZnTe surface layer to become amorphous and enhances the deep level emission around 1.6 eV, which is related to Zn vacancies. Results of resonant Raman and time-resolved photoluminescence spectra indicate that implantation induced intermediate band is related to the localized exciton emission bound to oxygen isoelectric trap, and the associated photo excited carriers have a relatively long decay time. This suggests that the reduction of lattice distortion and alloy disorder may be needed for converting localized states of the intermediate band into extended states, which is crucial to realize high efficiency ZnTe:O based IBSCs.