With an eye towards developing transformation-toughening ceramic coatings, we grew multilayers of polycrystalline zirconia and amorphous alumina in which the layer spacing was scaled to insure nanosize zirconia crystallites. In this manner, nanolaminates with a high volume fraction of tetragonal zirconia (t-ZrO2) were produced, independent of the deposition parameters and without the use of dopants.For a coating to be of practical use, not only must it contain a significant amount of t-ZrO2, but this phase must also transform locally to the monoclinic phase (m-ZrO2) m response to stress. In bulk zirconia-alumina composites, with dopant stabilized tetragonal zirconia, the martensitic t → m transition is auto-catalytic, resulting in widespread transformation of the parent phase. Twinning and slip are the recognized transformation mechanisms. In this work, we study the transformation mechanism in zirconia-alumina nanolaminates using high resolution electron microscopy (HREM).The multilayers were grown by reactive sputter deposition in a multiple target if diode system.1 Si (111) wafers were used as substrates for the multilayers studied by microscopy.