The conductivity and structure of 8-mol%-yttria-stabilized zirconia with additions of nickel oxide has been investigated, both in the as-prepared state and after reduction of NiO in hydrogen. During reduction at 1000 degreesC, the conductivity decreases by 40%-50% and most of the NiO dissolved in the zirconia is exsolved in the form of nickel particles. This is accompanied by the formation of tetragonal zirconia precipitates of size 10-40 nm and by an increase in the lattice parameter. On reoxidation in air at 1000 degreesC, the change in lattice parameter is partly reversed, but the conductivity shows no further changes.