The aqueous process currently employed in industry for the production zirconia has been modified to produce fully dispersible nanocrystals. Compared to the non-aqueous processes, only less expensive raw materials, lower temperature and simpler equipment were needed. Yet isolated ∼10nm ZrO 2 nanocrystals of pure tetragonal phase were achieved. After proper surface modification, the produced nanocrystals could be re-dispersed as 10wt% transparent aqueous sol. Less transparent but still fully dispersed sol could also be achieved when modified and re-dispersed in organic solvent such as hexane or chloroform. Further reduction of crystal size in this aqueous process should be possible after optimizing the process parameters, so that fully dispersed organic sol with <10nm zirconia nanocrystals needed for the preparation of transparent high refractive inorganic–organic can be produced in large volume.