The nature and degree of deformation-microfracture damage around Vickers indentations in a layered and graded aluminium titanate (AT)/(alumina-zirconia (AZ)) composite is studied. Samples with a homogeneous layer of AZ and a graded layer of heterogeneous AT/AZ are fabricated by an infiltration route. Depth profiling of the Vickers hardness shows that the hardness of the material is depth dependent with a relatively soft graded layer but a hard homogeneous layer. The microhardness of the graded layer is load dependent with 5.6 GPa as the asymptotic value at high loads. The evolution and accumulation of damage modes beneath Hertzian contacts are examined using "bonded-interface" sections. The stress-strain response of the material is monitored by Hertzian tests. The graded layer exhibits a distinctive "softening" in the stress-strain curve, indicating a microscale quasiplasticity which can be associated with grain debonding, grain sliding, diffuse microcracking, grain push-out and grain bridging. No contact-induced cracks are observed in the graded layer and the micro damage is widely distributed within the shear compression zone around and below the contacts. The capability of the graded material to absorb energy from the loading system and to distribute damage is somewhat akin to that of ceramics with heterogeneous microstructures.