Polycrystalline alumina-zirconia fibres were successfully synthesized by pyrolysis of preceramic fibres formed from mixed aluminium-zirconium chelate compounds. Ethyl 3oxobutanoatodiisopropoxyaluminium (EOPA) was reacted with zirconium tetrabutoxide (TBZ) in the presence of glacial acetic acid yielding a polymeric product. The infrared absorptions from 500-625 cm-1 due to AI-O and Zr 0 bonds changed from sharp to coalesced bands by treatment with acetic acid. The signal at 40 p.p.m, in the 27AI spectra of EOPA-TBZ increased in intensity on treating with acetic acid. The viscosity of the polymeric product increased as the amount of acetic acid increased. The viscosity of the precursor decreased on increasing the measurement temperature from 60 ~ to 75 ~ The precursor polymer pyrolysed at 800 ~ in air showed a broad X-ray diffraction of y-alumina, and crystallized in a mixture of y-alumina and tetragonal zirconia at 1000~ The median diameter of tetragonal zirconia in the 0~alumina matrix was 33 nm, when EOPA TBZ (AI/Zr=9/1) was heat treated at 1300~ for 1 h. The precursor fibres were pyrolysed at 1300~ to yield fine-grained fibres of cz-alumina including tetragonal zirconia, which was confirmed by Raman microprobe spectroscopy.