Abstract Addition of multiwall carbon nanotubes (MWCNTs) to polycrystalline ceramics is currently considered as a potential method for improving their mechanical properties, mainly their fracture toughness. High density composites produced by the addition of relatively small volume fractions of MWCNTs (0–2vol.%) to 3mol% yttria doped zirconia (3Y-TZP) have been produced by spark plasma sintering, resulting in a homogeneous distribution of MWCNTs with a small average matrix grain size in the range 153–182nm. The influence of transformation toughening is found to be very weak for this small grain size by measuring the extent of phase transformation in the crack wake. Also, no hydrothermal degradation takes place after more than 200h at 131°C either in the monolithic ceramic or in the composites. The study of the influence of MWCNTs on the microstructure and mechanical properties of 3Y-TZP shows that in the composites there is a very slight decrease in hardness, while the elastic modulus does not practically change. By fitting the crack opening displacement in the near crack tip region to the Irwin parabola, the intrinsic fracture toughness is found to be approximately the same in the matrix and in the 2vol.% composites. In spite of the observation of some crack bridging by nanotubes, from the measurement of the crack opening displacement (δ) along the crack faces, it is concluded that there is hardly any change in δ in 3Y-TZP by the addition of 2vol.% of MWCNTs not only in the crack tip region but also in all the range studied. However, the indentation fracture toughness is nearly 15% higher in 2vol.% composites as compared to their monolithic counterparts.