A bundle of feedrod composed of ordinary arranged alumina and zirconia green rods was co-extruded through a 6:1 reduction die. The volume fraction of zirconia phase was varied from 10 to 88 vol%. After the first co-extrusion, the individual pieces were bundled and co-extruded again, reducing the lateral size of each phase and multiplying the number of continuous monofilaments. After a 3rd extrusion step and sintering at 1600oC, crack-free composites with a fiber diameter of ~50 μm were obtained for all compositions. The fracture toughness of the composites was improved by introducing fine second phase filaments into the matrix. The maximum fracture toughness of 6.2 MPam1/2 was attained in the 3rd co-extruded composite which consisted of 53 vol% alumina and 47 vol% zirconia. Bending strength of the composites was almost the same as that of the monolithic alumina regardless of the composition.