In current molten carbonate fuel cells (MCFCs), submicron gamma-LiAlO2 powder is used as the electrolyte-retaining material because of its stability at high temperatures. However, it is recognized that gamma-LiAlO2 transforms to mainly alpha-LiAlO2 during MCFC operation. This suggests that gamma-LiAlO2 behavior in molten carbonate is different from that in air. To confirm the stable allotropic phase under actual MCFC conditions, we investigated the phase transformation of LiAlO2 in the presence of molten carbonate. It was found that essentially the alpha-phase is stable in a lose-temperature and high-p(co2) environment, whereas the gamma-phase is stable in a high-temperature and low-p(co2) environment. In addition, there exists relative particle size dependence of the allotropic transformation when alpha- and gamma-LiAlO2 powders coexist. Further, we confirmed that the phase composition and structure of a matrix which consists of the alpha-LiAlO2 powder is stable up to 7550 h at 700 degrees C when the powder particle diameter is 0.3 mu m. These results suggest that alpha-LiAlO2 powder with 0.3 mu m diam is preferred over conventional gamma-LiAlO2 powder as an electrolyte-retaining material in MCFCs.