The processing of stepwise graded Si3N4/SiC ceramics by pressureless co-sintering is described. Here, SiC (high elastic modulus, high thermal expansion coefficient) forms the substrate and Si3N4 (low elastic modulus, low thermal expansion coefficient) forms the top contact surface, with a stepwise gradient in composition existing between the two over a depth of similar to1.7 mm. The resulting Si3N4 contact surface is fine-grained and dense, and it contains only 2 vol% yttrium aluminum garnet (YAG) additive. This graded ceramic shows resistance to cone-crack formation under Hertzian indentation, which is attributed to a combined effect of the elastic-modulus gradient and the compressive thermal-expansion-mismatch residual stress present at the contact surface. The presence of the residual stress is corroborated and quantified using Vickers indentation tests. The graded ceramic also possesses wear properties that are significantly improved compared with dense, monolithic Si3N4 containing 2 vol% YAG additive. The improved wear resistance is attributed solely to the large compressive stress present at the contact surface. A modification of the simple wear model by Lawn and co-workers is used to rationalize the wear results. Results from this work clearly show that the introduction of surface compressive residual stresses can significantly improve the wear resistance of polycrystalline ceramics, which may have important implications for the design of contact-damage-resistant ceramics.