The Mg-PSZ/$Al_2O_3$ fibers were fabricated by the sol-gel method. The added $Al_2O_3$ amounts were varied from 5 to 20 mol%. The phase transformation studies of a drawn Mg-PSZ/$Al_2O_3$ fibers were investigated by use of X-ray diffraction, IR and Raman spectroscopy. Microstructure and tensile strength of fibers were subjected to scanning electron microscopy and tensile strength tester. When $Al_2O_3$ was added to the Mg-PSZ fibers, it was found out from the analysis of XRD patterns and Raman spectra that a small amount of crystalline spinel($MgAl_2O_4$) started to form due to the reaction between $Al_2O_3$ and MgO, at $1000^{circ}C$, and the phase transformation temperature of $ZrO_2$ crystal phase at different sintering temperatures increased. Also, the rapid grain growth with average size of 2.0 ${mu}m$ shown in Mg-PSZ fiber at $1500^{circ}C$ was considerably suppressed to 0.39 ${mu}m$ by adding $Al_2O_3$ at the same temperature. When the Mg-PSZ/$Al_2O_3$ fibers containing 5 mol% $Al_2O_3$ were sintered $800^{circ}C$ for 1 hr, average tensile strength of fibers was 0.9 GPs at diameters of 20 to 30 ${mu}m$, but as the sintering temperatures was increased to $1000^{circ}C$ for 1 hr, average tensile strength of fibers increased to 1.2 GPa in the same diameter range.