Alumina-zirconia composite powders for the purpose of improving fracture toughness and thermal shock resistance of alumina were prepared by the emulsion-kerosene drying method. The average particle size of composite powders was less then 1 $mu extrm{m}$ and their shapes were spherical. It was shown that the average particle size of composite powders decreased with the concentration of metal-salt in solution and the amount of span 80 added when preparing emulsions. The structure of all zirconia in composite powders heat-treated at 1200$^{circ}C$ was a tetragonal form at room temperature. This result implied that fine zirconia particles were homogeneously dispersed in the alumina matrix.