10vol.% zirconia-toughened alumina was reinforced with 5vol.% cerium hexaaluminate precipitates by in situ reduction of cerium dioxide during hot pressing at 1425–1550°C. The microstructure, mechanical properties and phase relations were determined. With increasing sintering temperature the microstructure shifts from a fine grain inter-type to a coarse grain inter-type composite structure, and the orientation of precipitates changes from perpendicular to the pressing plane to random. Mechanical properties change drastically during the microstructural transformation.