Microstructures of 10 vol% SiC whisker reinforced 3Y-TZP (3 vol% yttria stabilized tetragonal zirconia polycrystals) composite with addition of 5 wt% Al2O3 have been investigated using electron microscopy. The investigation focused not only on the morphology of the composite but also on the martensitic transformation of ZrO2. The results from high resolution electron microscopy (HREM) observations show that the boundaries between whiskers and the matrix are, in general, clean; however, in some areas, little glassy phases exist. The habit plane of t/m ZrO2 during the transformation was found at c(t)//a(m) in the present observations. The processes of t --> m transformation in various conditions have been discussed. The fact that no whisker pull-out was found during material breakage indicates that the toughening of this composite would come mainly from a t/m transformation toughening mechanism, as well as crack deflection and bridging. Finally, a fracture strength enhancing mechanism is discussed.