MgAl2O4 and x wt% ZrO2-MgAl2O4 (1 less than or equal to x less than or equal to 30) composite powders were prepared by the urea combustion route. The powders were further ground by either ball milling or attrition to refine the grain size. Zirconia was found solely in the tetragonal form. Dense materials were prepared by hot pressing. The spinel matrix grains were submicronic in size. The ZrO2 particles were homogeneously dispersed at the grain junctions of the matrix, and their average size increased from less than 0.20 mum to ca. 0.45 mum with increasing content of ZrO2. The formation of monoclinic ZrO2 particles proceeded accordingly, being easier in materials with a finer matrix grain size (ex-attrition).