Nanostructured alumina-20 vol% 3-yttria-stabilized zirconia (3YSZ) powder composites were synthesized by the wet-milling technique. The starting materials were a mixture of alumina micropowder and 3YSZ nanopowders. The mixtures were optimized for good sintering behaviors, high hardness, and toughness. Nano-crystalline grains were obtained after milling for 24h. The nano-structured powders were then processed to full density at different temperatures by high-frequency induction heat sintering. Effects of sintering temperature on the hardness, toughness, and microstructure properties have been studied. Al2O3-3YSZ composites with higher hardness, toughness, and smaller grain size have successfully been developed at relatively low temperatures by this technique.