Zirconia gel fibers were fabricated by sol-gel processing using zirconium alkoxides and 2, 4-pentanedione. Their phase transformation and microstructural evolution were studied after heat treatments up to 150$0^{circ}C$. Tetragonal ZrO2 began to form at 50$0^{circ}C$ and followed by monoclinic, tetragonal phase during subsequent heat treatments at 1000, 150$0^{circ}C$ for 1hour respectively. During cooling from 150$0^{circ}C$, cracks were created, propagated along grain boundaries due to the volume change from tetragonal to monoclinic transformation.