In this study, 12 mol% ceria-stabilized tetragonal zirconia polycrystal ceramics with xNd2O3 (where x equals 0, 0.1, 0.2, 0.3, 0.4, 0.5, and 0.7) were synthesized via the solid-state method, and the effects of Nd2O3 doping amounts on the mechanical properties and microstructure were studied. The results show that with an increase in the Nd2O3 doping amount, the grain size of the ceramics was reduced from 2.93 μm to 0.69 μm. The hardness and strength of the ceramics increased significantly, while the fracture toughness decreased. The reduction in fracture toughness was attributed to the reduction in tetragonal grain size, which suppressed the tetragonal–monoclinic phase transformation caused by stress. Additionally, as the content of Nd2O3 increased, the formation of cubic zirconia accelerated, but no second phase was observed. Most importantly, when the doping amount of Nd2O3 reached 0.3 mol%, the comprehensive mechanical characteristics of the ceramics were optimal. This provides a research basis for the preparation of nanoscale 12 mol% ceria-stabilized tetragonal zirconia polycrystal ceramics.