The aim of this work was the investigation of microstructure evolution during sintering of zirconia nanopowder. The powder containing 97 mol. % ZrO2 and 3 mol. %Y2O3, with particle size about 8 nm was prepared by the hydrothermal method. The flocculated and dispersed water suspensions of the powder were filter pressed under 5 MPa, which led to green bodies of relative density about 40%. Samples prepared from the suspensions showed distinct differences in densification behaviour. The observation of the microstructure evolution (i.e. density, fracture surface) in samples heat-treated at different temperatures, and detailed analysis of open porosity evolution were performed.