Ceria-stabilized tetragonal zirconia polycrystals show high toughness and high resistance to the low-temperature ageing degradation. However, ceria is less effective in stabilizing tetragonal zirconia compared to yttria and other trivalent oxides. The tetravalent oxide of CeO2 can be easily reduced to the trivalent CeO1.5, but phase separations occur leading to the destabilization of the tetragonal phase or the stabilization of the cubic phase. A procedure of high-temperature sintering and low-temperature reduction has been developed for preparing CeO1.5-stabilized tetragonal zirconia. It was found that 9 mol % CeO1.5 could stabilize the tetragonal zirconia to room temperature and that the stability region in the CeO1.5-ZrO2 system was extended to the lower dopant content region. The CeO1.5-stabilized tetragonal zirconia had a lower tetragonality and lower transformability compared to the CeO2-stabilized tetragonal zirconia with the same dopant mole percentage. The changes in the phase composition, tetragonality and stability caused by the reduction of CeO2 to CeO1.5 have been discussed in relation to the changes of oxygen stoichiometry, which is considered of the first-order importance in the stabilization of polymorphous zirconia.