The effect of UO$_2$ powder property and oxygen potential on characteristics of sintered UO$_2$-Gd$_2$O$_3$ fuel pellets has been investigated. Two types of powder, mixture of AUC-UO$_2$ and Gd$_2$O$_3$powders (type I) and mixture of ADU-UO$_2$ and Gd$_2$O$_3$powders (type II), have been prepared, pressed, and sintered at 168$0^{circ}C$ for 4 hours. Four sintering atmospheres with different mixing ratios of $CO_2$to H$_2$ gas ranging from 0 to 0.3 have been used. UO$_2$-Gd$_2$O$_3$ fuel has lower sintered density than UO$_2$ fuel, and the density drop is larger for powder type I than for powder type II. As the oxygen potential increases, the sintered density of UO$_2$-2wt% Gd$_2$O$_3$pellets increases but that of UO$_2$-10wt% Gd$_2$O$_3$ pellets decreases. It is found that pores are newly formed in UO$_2$-10wt% Gd$_2$O$_3$ pellets in accordance with the decrease in density. The grain size of UO$_2$-Gd$_2$O$_3$ fuel increases and a short range G4 distribution becomes homogeneous as the oxygen potential increases. A long range ed distribution and grain structure are inhomogeneous for powder type II. The lattice parameter of (U,Gd)O$_2$solid solution decreases linearly with Gd$_2$O$_3$ content. The dependence of UO$_2$-Gd$_2$O$_3$fuel characteristics on powder type and sintering atmosphere have been discussed.