Abstract: TEM morphology and mechanical properties of two Mg-PSZ ceramics were investigated. The samples of 7.98 mol % MgO was two phases, cubic and tetragonal, at the sinter temperature. The tetragonal phase was coarse and transformed totally into monoclinic one with martensitic mechanism during cooling. Inside the monoclinic particles, there were twins developing from boundary to boundary, where appeared wide microcracks with little toughening effect.