Mullite-zirconia (0∼4 mol% yttria) composites were obtained by In-situ sintering of zircon and alumina mixture, and their mechanical properties were studied in conjuction with microstructure observation. Martensitic transformation temperature (Ms) of zirconia dispersed in the mullite matrix decreased with Y2O3 contents and was about 600$^{circ}C$ for ZrO2 containing 4 mol% Y2O3. On cooling of this composites, tetragonal to monoclinic phase transformation induced microcracks at the grain boundary of mullite matrix. The microcracks seemed to absorb the fracture energy in stress field during mechanical tests. Therefore, toughening mechanisms of this composite were considered to nucleation and extension of microcrack, and crack deflection mechanism due to the difference of thermal expansion coefficient between matrix and dispersed phase.