The alumina-zirconia composite powders of core particle ZrO2 coated with Al2O3 were prepared by the hydrolysis-deposition of the mixed aluminum salt solution of Al2(SO4)3-Al(NO3)3-Urea. The effects of hydrolysis reaction and coating parameters on characteristics of coated powders and composites were also investigated. The degree of coating could be estimated from the ratio of tetra-/mono-ZrO2 present at the room temperature after heat-treating coated powders at 120$0^{circ}C$ and the result of TEM observations. When the content of ZrO2 in the dispersed coating system, the coating time, and the volume ratio of water/solution were 50 mg/g, 180 min, and 5, respectively the coating efficiency was maximum (the ratio of tetra-/mono-ZrO2 was 87/13). The relative densities of coated Al2O3-ZrO2 composites sintered at 1$650^{circ}C$ for 4 hrs were about 91~98% and the maximum ratio of tetra-/mono-ZrO2 in Al2O3-20wt% ZrO2 composites was 62/38.