ZrO2-Al2O3 nanocrystalline powders have been synthesized by oxidizing ternary Zr2Al3C4 powders. The simultaneous oxidation of Al and Zr in Zr2Al3C4 results in homogeneous mixture of ZrO2 and Al2O3 at nanoscale. Bulk nano- and submicro-composites were prepared by hot-pressing as-oxidized powders at 1100 degrees-1500 degrees C. The composition and microstructure evolution during sintering was investigated by XRD, Raman spectroscopy, SEM, and TEM. The crystallite size of ZrO2 in the composites increased from 7.5 nm for as-oxidized powders to about 0.5 mu m at 1500 degrees C, while the tetragonal polymorph gradually converted to monolithic one with increasing crystallite size. The Al2O3 in the composites transformed from an amorphous phase in as oxidized powders to theta phase at 1100 degrees C and alpha phase at higher temperatures. The hardness of the composite increased from 2.0 GPa at 1100 degrees C to 13.5 GPa at 1400 degrees C due to the increase of density.