The ageing of zirconia under hydrothermal conditions is a key issue in many applications, as the properties and thickness of the degraded layer influence the reliability of the material. This paper presents a study by nanoindentation of the hydrothermal degradation of tetragonal zirconia polycrystals doped with yttria with a tetragonal grain size of 0.3 μm and of the same material after heat-treatment at high temperature (1650 °C) in order to develop a duplex cubic-tetragonal microstructure with a large tetragonal grain size. Nanoindentation is used to evaluate the Young’s modulus and hardness of the degraded surfaces as a function of indenter penetration depth. The mechanisms of hydrothermal degradation are also studied. Using Raman spectroscopy, atomic force microscopy and focused ion beam (FIB) cross-sections, we show that hydrothermal degradation induces t–m phase transformation and microcracking under the surface. Microcracks in degraded zirconia, clearly observed in FIB cross-sections, are associated with the decrease in hardness and Young’s modulus of the degraded surface. Nanoindentation is used to detect and quantify the degradation of zirconia by calculating the decrease in hardness and Young’s modulus with penetration depth. Using a thin-film model, the depth of the degraded layer and its mechanical properties are also extracted. As expected, we demonstrate that duplex zirconia with a large tetragonal grain size is more sensitive to hydrothermal degradation than monophasic small-grain tetragonal zirconia.