The microstructure of an Al2O3-24 vol % ZrO2 composite prepared by pressureless-sintering was investigated by high-resolution electron microscopy. The composite was formed of homogeneously dispersed ZrO2 and Al2O3 grains with average sizes of 0.3 and 0.5 mum, respectively. Most ZrO2 grains had a monoclinic structure, but a few ZrO2 embedded in Al2O3 grains were a tetragonal structure. At interfaces between ZrO2 with a lamella-type twin structure and Al2O3, microcracks were observed, in addition to strain fields in the Al2O3 matrix. Complex twin structures accompanied by dislocations were observed in ZrO2 with a spherical shape. In in situ observations with electron-beam heating, it was found that a crack propagated along an Al2O3/ZrO2 interface and stopped at the place where a tetragonal ZrO2 had undergone a structural change to monoclinic ZrO2.