The microstructures of zirconia reinforced with silicon carbide fibres prepared by the sol-gel process have been examined using a transmission electron microscope. The characteristic feature of highly oriented grains of monoclinic zirconia, with its unique b-axis as well as c-axis of the tetragonal structure nearly all parallel to the hot pressing plane, shows the formation of matrix texture. Twinning in the monoclinic phase was well developed and highly dominated by twinning with the (100) plane as the interface. Alternative twinning with the interfaces parallel to the (001) plane has also been revealed and a possible model was suggested based upon the basic structure to be coincident with the [100] rotation twin ni ng. Strong intergrowth of the tetragonal and monoclinic phases was frequently found and the orientation relationship was determined. The possible orientation variants resulting from the tetragonal to monoclinic phase transformation were proposed based upon such orientations of the lattices. Two of them with the misorientation angle of 9 degrees 15’ and 80 degrees 45’, respectively, were also found to coexist with the two kinds of twinning. Such texture configuration may have a close relation to the improvement of toughness.