Alumina-20 wt% zirconia (ATZ) and zirconia-20 wt% alumina (ZTA) composites were prepared by conventional sintering of commercial powders, with average particle sizes in the range 0.35–0.70 μm. Sintering at 1650 °C for 4 h resulted in final densities up to 96%. Bending strength and hardness increased with the final density. The tetragonal volume fraction was strongly dependent on both the final density and tetragonal grain size. The relatively high fracture toughness of 9 MPa m1/2 was associated with the highly dense microstructure consisting of tetragonal grains of the critical size.