Metastable ZrO2 (3 mol% Y2O3)-20 wt% Al2O3 oxide composite powders are obtained by liquid nitrogen quenched plasma spraying of commercially available powders. During passage of the plasma, Al2O3, ZrO2, and Y2O3 are molten and rapidly solidified upon impact on the liquid nitrogen cooled substrate. Aluminum cations are nearly completely incorporated into zirconia leading to the stabilization of the cubic zirconia phase. Spark plasma sintering of these powders is successfully performed to obtain a dense composite with grain sizes in the range of 300-500 nm. Phase separation of the immiscible phases accompanied by homogeneous precipitation of Al2O3 occurs during sintering. Because of the short holding times applied during densification, complete phase separation may be suppressed and the metastable character is partially retained. The detected Al2O3 content in ZrO2 is still larger than the equilibrium solubility. Phase evolution during all phases of the process is recorded by means of X-ray diffraction, scanning as well as transmission electron microscopy, and Raman spectroscopy.