Neutron and X-ray diffraction were used to investigate changes in the phase composition and lattice parameters with temperature and pressure of a 20-wt% zirconia-dispersed alumina composite. Neutron diffraction was used to determine the variation of tetragonal/monoclinic zirconia phase abundance for the bulk with stress. The bulk tetragonal/monoclinic ratio decreased by 40% for a stress of 550 MPa. A difference in the tetragonal/monoclinic ratio between the near-surface and the bulk of the processed samples is believed to contribute to observed variations in nonuniform strain in the matrix, which has the effect of prestressing the sample. Placing a stress on the sample initially releases this prestressing.