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Before troubleshooting this issue it will be a good idea to take a full backup.

The error you are getting is quite common in WordPress and can be caused due to some different issues. As described in this post try to disable all your plugins, try switching to the default WordPress theme and try to do this again to see if the error still occurs.

If this won’t help there might be another reason: your web server is configured with PHP settings that are too low to allow the theme ZIP file to upload. Thus, the web server is rejecting the upload. WordPress is giving you a rather ambiguous message in response. Recommended PHP configuration limits are as follows:

memory_limit 256MB
max_execution_time 300
post_max_size 32MB
upload_max_filesize 32MB

Ask your webhosting provider to increase your server resources.

If nothing helps try to upload theme manually through the FTP to /wp-content/themes/ directory.