Active precursor powders of MgO-ZrO 2 composite system were prepared in three different mole ratio by electrolytic interaction of inorganic salts in aqueous phase. Complete hydrolysis occurred at the critical instability point of the system at pH 9. The amorphous precursor powders exhibited very high specific surface area. The sintered properties of the composite system are dependent on mole ratio of MgO:ZrO 2, sintering temperature and the rate of crystallization of constituent phases. The presence of periclase grains and cubic stabilized ZrO 2 particles in the sintered body was confirmed by X-ray diffraction analysis while scanning electron micrographs indicated that MgO particles occupy the inter-granular positions between ZrO 2 polycrystals.