Zirconia-toughened alumina (ZTA) composites colloidally processed from dense aqueous suspensions (> 50 vol% solids) had ZrO2 content varying from 5 to 30 vol%. Tetragonal zirconia (TZ) was used in the unstabilized, transformable form (0Y-TZ), in the partially transformable form, partially stabilized with 2 mol% yttria (2Y-TZ), and in the nontransformable form stabilized with 3 mol% yttria (3Y-TZ). After sintering in air to similar to 99% theoretical density, the elastic properties, flexure strength and fracture toughness were examined at room temperature. Dynamic moduli of elasticity of fully deagglomerated compositions did not show the effects of microcrack formation during sintering, even for materials with unstabilized zirconia. In all compositions made from submicron powders and with low content of dispersed phase (less than 10 to 20 vol%), the strength increased with increasing ZrO2 content to a maxim um of similar to 1 GPa, irrespective of the degree of stabilization of t-ZrO2. With increasing content of the dispersed phase (> 20 vol%), heteroflocculation of powder mixtures during wet-processing led to the formation of ZrO2 grain clusters of increasing size. Residual tensile stresses built within cluster/matrix interfaces upon cooling not only facilitated the t-m ZrO2 phase transformation in final composites with transformable t-ZrO2, but also led to lateral microcracking of ZrO2/Al2O3 interfaces. This enhanced fracture toughness, but at larger ZrO2 contents the flexure strength always decreased due to intensive microcracking, both radial and lateral. The important microstructural aspects of strengthening and toughening mechanisms in ZTA composites are related in discussion to the effects of heteroflocculation of powder mixtures during wet-processing.