An increase in hardness with reducing grain sizes is commonly observed in oxide ceramics in particular for grain sizes below 100 nm. The inverse behavior, meaning a decrease in hardness below a critically small grain size, may also exist consistently with observations in metal alloys, but the causing mechanisms in ceramics are still under debate. Here we report direct thermodynamic data on grain boundary energies as a function of grain size that suggest that the inverse relation is intimately related to a size-induced increase in the excess energies. Microcalorimetry combined with nano and microstructural analyses reveal an increase in grain boundary excess energy in yttria-stabilized zirconia (10YSZ) when grain sizes are below 36 nm. The onset of the energy increase coincides with the observed decrease in Vickers indentation hardness. Since grain boundary energy is an excess energy related to boundary strength/stability, the results suggest that softening is driven by the activation of grain boundary mediated processes facilitated by the relatively weakened boundaries at the ultra-fine nanoscale which ultimately induce the formation of an energy dissipating subsurface crack network during indentation.