In order to assess the changes in mechanical properties of Zircaloy cladding at extreme conditions, tensile testing and hardness measurements were carried out on Zircaloy-2 specimens that were annealed with ThO2-3.45% UO2 at 1200 A degrees C for 15 min. Similar studies were repeated with simulated high burn-up fuel powders based on ThO2-3.45% UO2. The above treatment resulted in increase in hardness and reduction in elongation in Zircaloy-2. This is attributed to the oxygen embrittlement of Zircaloy-2.