In recent years, magnesia stabilized zirconia (MgO-ZrO2) nanocomposite has made a versatile progress in applications due to its outstanding resistance to temperature and corrosion. It has been found to have dominant mechanical properties for industrial applications such as manufacturing of high temperature nozzles, thermal barrier coatings for gas turbine blades etc. Among all phases of zirconia, tetragonal and cubic are found to have versatile applications due to its stability using suitable application based dopants at room temperature. In the present work, magnesia-zirconia nanocomposites (MgO-ZrO2) have synthesized using sol-gel method at 400 and 600 degrees C. In addition to that the effect of citric acid and urea as the modifiers on nanocomposite has studied efficiently. The characterization was accomplished by X-ray diffraction, Scanning Electron Microscope with EDX, Raman, Absorbance Study and Fourier Transform Infra-Red Spectroscopy. MgO-ZrO2 nanocomposite was used as a heterogenous catalyst in the reduction of 4-nitrophenol and its antibacterial studies was determined. The crystallite size of the composite prepared using citric acid was found to be 4.5nm and the band gap energy value was found to be 4.9eV. The morphology of MgO-ZrO2 prepared using citric acid has exhibited flake like structure with smooth surface. The activity of nanocomposite was enhanced in the reduction of 4-nitrophenol owing to smaller crystallite size. [GRAPHICS] .