The relationship between microstructure and mechanical properties was studied in Al2O3–ZrO2 eutectic rods. The material, produced by directional solidification using the laser-heated float zone method, was formed mainly of colonies consisting of a fine interpenetrating or ordered network of ZrO2 and α-Al2O3 surrounded by a thick boundary region that contained pores and other defects. The flexure strength of the eutectic rods was excellent (>1.1 GPa) owing to the small critical defect size and the high toughness (7.8 MPa ). No microstructural changes were observed after about 1 h of exposure at 1700 K, and the eutectic oxide maintained a very high strength up to this temperature. The nature of the critical defects that led to fracture, the toughening micromechanisms, and the differences between the longitudinal and transverse strength are discussed in the light of the microstructural features of the material.