Partially stabilized tetragonal zirconia (t-ZrO2) is of particular interest for hard tissue replacements. Aging-related failures of the ceramic associated with the gradual transformation from t-ZrO2 to m-ZrO2 (monoclinic zirconia) can lead to its premature removal from the implant site. In addition, monitoring the satisfactory performance of the implant throughout its lifespan without invasive techniques is a challenging task. The magnetic resonance imaging (MRI) contrast ability of dysprosium (Dy3+) is well-established. To this aim, varied levels of Dy3+ additions in the ZrO2-SiO2 binary oxide system were explored. The results indicate the effective role of Dy3+ in the formation of thermally and mechanically stable c-ZrO2 (cubic zirconia) phase at higher temperatures. The presence of SiO2 influenced the t-ZrO2 stabilization, whereas Dy3+ tends to occupy the ZrO2 lattice sites to induce c-ZrO2 transition. Magnetic and MRI tests displayed the commendable contrast ability of Dy3+ stabilized ZrO2-SiO2 binary systems. Nanoindentation results demonstrate a remarkable enhancement of the mechanical properties.