Yttria stabilized zirconia-alumina (YSTZ-Al2O3) nanocomposite system with various Al2O3 concentrations has been synthesized by sol-gel route. The experimental techniques XRD, DTA, TGA, FT-Raman, FT-IR, SEM, Vicker's hardness measurements, density measurements and Impedance spectroscopy were used to characterize the synthesized specimens. DTA result shows two exothermic reactions: one around 760 degrees C and another around 960 degrees C. XRD results confirm that the specimen starts to crystallize on heating above 750 degrees C. Well resolved XRD reflections corresponding to tetragonal (t) ZrO2 were obtained after the specimens were heated at 1000 degrees C. FT-Raman results confirmed that the crystallites developed above 750 degrees C was t-ZrO2. It was observed from the XRD and DTA results that the bulk and grain boundary region crystallize independently in two different temperatures with a difference in temperature of about 200 degrees C. The crystallization temperatures increase with Al2O3 contents. At 1300 degrees C, the pure YSTZ and 5 and 10 wt % Al2O3 added YSTZ specimens underwent structural transformation from tetragonal to monoclinic ZrO2. But, the tetragonal symmetry remains stable at 1300 degrees C with an addition of 15 wt % Al2O3 The system which retain its tetragonal symmetry at its processing temperature (approximate to 1300 degrees C) gives high hardness and maximum density values. Almost 100% theoretical density value was obtained at 1300 degrees C with an addition of 15 wt % of Al2O3