In this study, zirconia-toughened alumina (ZTA) ceramics were prepared and used to fabricate crack-free, high-performance titanium alloy (TC4)/ZTA ceramic composites with a gradient material design through laser-directed energy deposition. The ZTA content gradients ranged from 0wt.% (0ZTA layer) to 20wt.% (20ZTA layer). During laser deposition, Ti reacted with Al2O3 in the ZTA ceramics to form TiAl2O5. Under rapid cooling in the non-preheated sample, the TiAl2O5 and ZrO2 in the 20ZTA layer underwent a phase transformation, resulting in the formation of TiAl2O5, Al2O3, and t-ZrO2. The cooling rate was lower in the preheated sample, which promoted the reaction between Ti and ZrO2, producing Ti2O. The stability of the β-Ti crystal structure was significantly affected by the presence of Al and Zr in the ZTA. First-principles calculations revealed that preheating caused a larger proportion of Al2O3 to melt, primarily destabilizing the β-phase through the action of Al. The reduction in the cooling rate also promoted the β → α phase transformation; making the α-phase dominant in the 20ZTA layer of the preheated sample. In the preheated sample, the hardness of the 20ZTA layer was 1.95 times greater than that of the 0ZTA layer, and the wear volume was reduced by 91.42%. The strengthening mechanisms in the 20ZTA layer, in descending order, were solid solution strengthening, dislocation strengthening, load transfer, and grain refinement.