The reaction sintering of Al2O3-ZrO2-Nb composite has been investigated using Al2O3, and ZrAl2 powders. Two kinds of specimens, 78.3Al2O3-14.0Nb2O5-7.7ZrAl2 in wt.% (AZN-5) and 72.3Al2O3-13.8Nb2O5-7.5ZrAl2-6.4ZrO2(AZN-10), were prepared. Powder compacts were sintered at various temperatures between 1$600^{circ}C$ and 1$700^{circ}C$ for 30 min in Ar. DTA and X-ray analysis have showen that a reaction between Nb2O5 and ZrAl2 started at 149$0^{circ}C$ to form Al2O3, ZrO2, and Nb. The sintered density increased with the sintering temperature. AZN-10 specimen showed higher density than AZN-5 specimen for almost all the experimental conditions. Al2O3-ZrO2-Nb composite hot pressed after reaction sintering showed higher toughness and lower hardness than hot pressed Al2O3-ZrO2. The crack propagated through many metallic Nb particles which showed plastic deformation, and this is the cause of the increase in toughness of Al2O3-ZrO2-Nb composite over Al2O3-ZrO2.