The influence of second phase zirconia particles on the electrical properties and fracture behavior of various polycrystalline soft Pb(Zr1-xTix)O-3 (PZT) compositions was investigated. PZT composites with yttria-stabilized tetragonal zirconia particles exhibited enhanced crack resistance in comparison to monolithic compositions, regardless of the PZT composition. The addition of zirconia, however, was found to change the PZT composition through the diffusion of zirconium, resulting in variations in the observed piezoelectric and ferroelectric responses. Through the tailoring of the PZT matrix composition, the large electromechanical response and enhanced fracture toughness could be retained. The variation in both small and large signal properties is contrasted to fracture results and crystal structure changes, as determined by X-ray diffraction.