The aim of the present study was to investigate the production of tetragonal zirconia (t-ZrO2) particles (experimental t-ZrO2) from monoclinic zirconia (m-ZrO2) and to evaluate the effect of the t-ZrO2 content on the fracture toughness of alumina–zirconia composites by conducting ASTM E399 standard test. In the laboratory study, t-ZrO2 powder was produced by heat treating m-ZrO2 containing 10wt.% MgO. Alumina and alumina–zirconia composite powders containing various types and amounts of m-ZrO2 and t-ZrO2 were prepared (0–20wt.%), shaped by slip casting to achieve a uniform distribution and homogeneous microstructure in accordance with the dimensions of ASTM E399 standards, dried, sintered at three different temperatures: 1400, 1500 and 1600°C for two hours, and characterized. The results of the XRD analysis showed that t-ZrO2 was produced at 1400°C. In t-ZrO2-doped alumina composites, t-ZrO2 partially transformed to m-ZrO2 after sintering, whereas commercial t-ZrO2 (Tosoh TZ-3Y) remained intact. SEM studies on samples sintered at 1600°C revealed that the addition of zirconia inhibited abnormal grain growth of alumina, leading to a homogeneous and equiaxed grain structure, especially at high concentrations of zirconia. ZrO2-doping enhanced the fracture toughness of the composites, which increased with an increase in the t-ZrO2 content. The maximum fracture toughness was 11.5MPam1/2 and was observed when the t-ZrO2 content was equal to 20wt.%. Alternatively, the maximum fracture toughness for pure alumina was 5.9MPam1/2.