Zirconia/stainless steel composites have been prepared by a wet processing method with metal volume concentration ranging from 15% to 30%. The composites were characterized by electrical andmechanicalmeasurements. The dependence of the electrical properties of these composites with themetal concentration presents a percolative behaviour with ametal-insulator transition, in addition to an increment of the capacity in the neighbourhood of a critical volume concentration. This value was found to be fc = 0.285, which is much higher than the theoretical value for randomly dispersed 3D composites (fc = 0.16). It has been found that the incorporation of stainless steel particles to zirconia matrix, increases the toughness and decreases both the hardness and the flexural strength. The enhancement of toughness is attributed to a crack deflection mechanism as a consequence of a weak ZrO2/stainless steel interface.This work was supported by CICYT, Spain, under project number MAT97-0724, S.R.H. Mello Castanho acknowledges Mr. S. Kvist, from Höganäs for send the steel powder samples.Peer reviewed