Yttria-stabilized zirconia (NiO/YSZ) composites were prepared by the modified citrate-nitrate combustion synthesis. The citrate-nitrate combustion proceeded through several consecutive steps. Evolution of structure in the system and its changes were followed up by thermogravimetry-differential scanning calorimetry, X-ray powder diffraction, extended X-ray absorption fine structure, and high resolution transmission electron microscopy analyses of intermediate products prepared at distinct temperatures that correspond to different stages of the combustion process. It was shown that the crystalline structure developed gradually, first with crystallization of nano-sized NiO particles (400 degrees-700 degrees C), which was followed by crystallization of YSZ (800 degrees-900 degrees C). The final composite material after heat treatment at 1100 degrees C comprised of nano-crystals with an average size of 6.5 +/- 2 nm.