New functionally graded Al2O3/Y-ZrO2 ceramics are developed as a new material for production of hip prosthesis, especially all-ceramic hip bearings. The used concept of graded ceramics is expected to provide better long-term performance based on improved mechanical properties and lower clinical risks. Mechanical properties are strongly dependent on the distribution of residual stresses resulting mainly from phase specific stresses after cooling from the sintering temperature. However, these stresses could be optimized by an appropriate selection of a concentration profile of constituent phases. The non-destructive neutron diffraction mapping of residual stresses has been used to investigate this problem experimentally. In addition, the small-angle neutron scattering technique was applied to study the porosity in the ceramics as function of the production parameters,