The objective of this study was to produce well-dispersed nanosized yttria tetragonally stabilized zirconia (Y-TZP) powder in aqueous suspension. The Y-TZP powder was produced by precipitation from homogeneous solution at 200° C under hydrothermal conditions. A homogeneous solution was created through the use of a complexing agent, which subsequently could be used in a dispersion scheme developed for the nanosized Y-TZP powder. Characterization of the Y-TZP powder was performed using X-ray diffraction, Raman spectroscopy, X-ray fluorescence, and high-resolution transmission electron microscope. The overall goal of this study is the eventual production of bulk ceramics from well-dispersed nanosized aqueous ceramic suspensions via wet processing techniques.