Layered structure with composition gradient between inner layer of alumina (Al2O3) and outer layer of zirconia ( ZrO2-3mol% Y2O3 ;TZ-3Y) was fabricated using a gel casting process for the inner layer and a dip coating process for the outer layer in an aqueous system. The interlayer with composition gradient was prepared by mixing the Al2O3 and TZ-3Y slips as a volume ratio. Dried green bodies of the inner layer were pre-sintered at 1100°C for 5hr. After pre-wetting the pre-sintered bodies, the dip coating was preformed with mixed slips. Two kinds of composition gradients in the interlayer were prepared to observe the effect of composition gradient on mechanical properties, with same thickness. One is continuous composition gradient from Al2O3 to TZ-3Y with 9:1 to 1:9 volume ratios, and the other is layered structure with 8:2, 6:4, 4:6, and 2:8 volume ratios of Al2O3 and TZ-3Y. After the dip coating with each mixed slip, the coated bodies were sintered at 1100°C for 1hr to prevent delamination between each layer. The last dip coating was performed with the TZ-3Y slip, and then sintered at 1600°C for 3hr. Microstructure and element analysis of the sintered bodies were observed using SEM. For measurement of flexural strength, a standard four-point banding test was conducted. Also, hardness and modulus were measured using micro- and nano-indentation techniques. The step-like gradient in microstructure and composition is achieved through the gel casting and dip coating processes, including a gradual change in H and E from the inner to outer layers.