Effect of Al2O3 addition on the mechanical properties and microstructure of Ce-TZP were studied. 12, 14, 16Ce-TZP containing 0-40wt% Al2O3 were prepared by sintering at 155$0^{circ}C$ for 2h. in air. Density, linear shrinkage, bending strength, Vickers hardness, microstructuer and the amount of stress induced phase transformation were examined. Vickers hardness increased linearly with increasing amounts of Al2O3. The amount of transformation and fracture toughness decreased linearly with increasing amount of Al2O3. Linear shrinkage and relative density decreased with increasing Al2O3 content in all composition of Ce-TZP. Grain growth of Ce-TZP was inhibited by Al2O3 dispersion and fracture mode of Ce-TZP/Al2O3 composites transformed from intergranular to transgranular fracture as the amount of Al2O3 increased. TEM observation revealed that Al2O3 particles were located mainly at grain boundaries of ZrO2.