Well-dispersed ceria-gadolinia oxide powders were obtained from thoroughly isopropanol-washed coprecipitated oxalates, followed by calcination at 800 degrees C. The characteristics of the calcined powders and the microstructure of the green compacts were found to be of great importance in the sintering behaviour. Those green bodies in which some agglomerate survived after compaction reached a lower final density, while those having soft agglomerates were almost fully densified at a sintering temperature as low as 1400 degrees C. The densification process was studied by isothermal and constant heating rate dilatometry, and microstructural development at each stage in the processing was followed by SEM. By controlling the processing variables it was possible to obtain low-temperature near fully dense (better than 99%) and tough CeO2-Gd2O3 bodies with homogeneous microstructure.