The microstructure, mechanical properties, fracture behaviour and toughening mechanisms of 20 vol % SiCw-ZrO2 (2 mol % Y2O3) composite were investigated by X-ray diffraction, scanning and transmission electron microscopies, energy dispersive analysis of X-rays, high-resolution electron microscopy techniques and the three-point bending test. The results show that the ZrO2 (2 mol % Y2O3) matrix is well strengthened and toughened by 20 vol % SiCw. The SiC whiskers are directly bonded to the matrix with no interfacial reaction layer or amorphous phase. The main toughening mechanisms of the composite are crack deflection, dynamic tetragonal to monoclinic ZrO2 transformation, whisker pull-out and crack bridging. In addition, the fracture behaviour of the composite was observed using an in situ fracture technique.