Ceramic laminates have been fabricated with thin layers, containing a mixture of unstabilized zirconia (NIZ-ZrO2) and alumina (Al2O3), sandwiched between thicker layers of alumina that contain a small fraction of Y2O3-stabilized tetragonal ZrO2 to inhibit grain growth. The MZ-ZrO2 undergoes a tetragonal-to-monoclinic phase transformation during cooling to produce biaxial compressive stresses in the thin layers. Cracks that extend within the thicker alumina layers can be arrested by the compressive layers to produce a threshold strength, i.e., a strength below which the probability of failure is zero. Laminates composed of Al2O3 layers 315 +/- 15 mum thick and Al2O3/MZ-ZrO2 layers 29 +/-3 mum thick exhibit a threshold strength of 507 +/- 36 MPa, regardless of the MZ-ZrO2 content, for volume fractions greater than or equal to0.35. These results, piezospectroscopic stress measurements, and microstructural observations suggest that microcracking produced during the transformation reduces the magnitude of the compressive stresses achieved, which in turn limits the magnitude of the threshold strength.