The stability of an yttria-stabilized zirconia and samaria-doped ceria (YSZ-SDC) nanocrystalline heterophase system was studied with in situ high-temperature X-ray diffraction during a simulated sintering program. Formation of YSZ-SDC solid solution in the nanocrystalline system was found to start at a low temperature between 900 degrees and 950 degrees C. The analysis of lattice parameters as a function of temperature suggested that YSZ and SDC species diffused mutually during the formation of solid solution. The electrical conductivity of the YSZ-SDC solid solution was significantly lower than that of the YSZ and SDC.