A heterogeneous azeotropic distillation process was effectively used to dehydrate hydrous zirconia and therefore prevent the formation of hard agglomerates in the preparation of nanoscale zirconia powder. The mechanism of azeotropic distillation to prevent hard agglomerate from forming was studied by investigating the interaction of hydrous zirconia with n-butanol. The prepared powder was sintered to 99.5% of theoretical density by slow-sintering (average grain size of similar to 200 nm), 97.5% by fast-sintering (average grain size of similar to 120 nm) at 1250 degrees C.