Powders for ZrO2 toughened Al2O3 (ZTA) composites containing 8, 11, 13.8 and 16.5 vol% ZrO2 (stabilized with 11.5 mol% CeO2) are prepared by a hybrid sol-gel method using Al2O3 powders and a sol formed from Zr-alkoxide and cerium nitrate. Besides ZrO2, a small amount of a Ce-zirconate phase (Ce2Zr2O7) forms when the powders are calcined in air. The zirconate phase persists in the sintered specimens and its amount increases from surface to centre of the specimen. Presence of higher amount of Ce2Zr2O7 promotes exaggerated grain growth of Al2O3. Particles of Zr rich phases are found to be trapped inside the Al2O3 grains. Composites exhibit higher fracture toughness despite lower transformability of t-ZrO2 during fracture when they contain high amount of zirconate. Crack bridging is shown to be an important mechanism contributing to enhancement in fracture toughness in these composites.