Mechanical properties of titanium diboride (TiB2) cermets critically depend on the composition of the binder phase. Both, fracture toughness and hardness are substantially increased by avoiding the formation of extremely brittle secondary borides which form during sintering by chemical reactions between TiB2 and the metallic additives. Fractographic observations of TiB2 cermets without secondary borides show the presence of ductile ligaments of the binder phase bridging the advancing crack tip. The powder metallurgy processing route applied to these materials allows modification of the binder phase structure from the ferritic iron-aluminium phase to Fe-Ni-Al austenite by changing the aluminium content of the powder mixtures. The highest toughness values have been obtained for the TiB2 cermets with an austenitic binder phase. X-ray diffraction analyses of the fracture surfaces of such samples show that the binder phase is metastable exhibiting stress induced martensitic transformation during fracture. This new family of materials presents an outstanding combination of hardness and toughness, comparable to those obtained with commercial grades of tungsten carbide (WC) hardmetals.