Nanocomposites of MgO with Y2O3 have been produced from the respective nitrates by an esterification reaction with ethylene glycol and citric acid. The evolution of nitrous oxides during the reaction causes the product to foam, and the calcination of this foam gives nanocomposite powders with extremely fine, uniform grains, and phase domains. These microstructures are remarkably stable both under postcalcination heat treatment and during consolidation by hot pressing. These stable microstructures arise as a result of the decomposition sequence: this involves the formation of a metastable amorphous/vitreous intermediate followed by concurrent crystallization and phase separation on the nanoscale.