The densification of dual-phase yttria-doped tetragonal zirconia polycrystals (Y-TZP) and -Fe2O3 (hematite) composite powders is described. Different powder synthesis methods, different forms of dry compaction processes, and two sinter methods (pressureless sintering and sinterforging) were compared. The homogeneity and average grain sizes of the sintered compacts were determined with SEM/EDX. Compacts produced from homogeneous powders that were prepared by the co-precipitation (CP) method showed large-scale phase segregation and grain growth during sintering. Compacts made from the less homogeneous sequentially precipitated (SP) powders showed far less phase segregation and relatively small grain growth during sintering. Dense (>96%) nano/nano zirconia-hematite composites were made with average grain sizes of 80 nm by sinterforging at 1000 °C and 100 MPa.