The mechanical properties and microstructure of ceramics of the system Al2O3-ZrO2-Y2O3 sintered at 1$650^{circ}C$ for 2h after powder preparation by the precipitation method from Al2(SO4)3.18H2O, ZrOCl2.8H2O and YCl3.6H2O were investigated. The Al2O3-ZrO2-Y2O3 ceramics sintered at 1$650^{circ}C$ for 2h after mixing alpha-Al2O3 and ZrO2-Y2O3 powders, both were separately precipitated and calcined, were found to have the relative density higher than 97.5% so that the strengthening and toughening mechanisms could be explained mainly as the stress-induced phase transformation. On the other hand, the sintered bodies prepared by co-precipitating the three starting materials were measured to have the relative density lower than 85% so that the degradation of strength were observed above 15 vol% ZrO2 contents due to the high porosity by which the effect of stress-induced phase transformation was assumed to be depressed.