The strengthening mechanism of 12 mol%CeO2-doped tetragonal zirconia polycrystals (12Ce-TZP) after reduction at 600 to 1000degreesC in hydrogen gas was investigated from the viewpoints of crystal phase, hardness, bending strength and residual stress by X-ray analysis. Weight loss as well as color change were recognized in the reduced Ce-TZP, where oxygen release was caused by the reduction of Ce4+ to Ce3+. In the tetragonal phase after reduction heat treatment, the tetragonality decreased and the lattice volume increased by 1%, which is due to the increase in ionic radius of Ce4+ to Ce3+. The highest hardness value of 12.8 GPa was obtained on the surface of an entirely reduced 12Ce-TZP. When only the surface layer was reduced by heat-treatment for short time, the 12Ce-TZP specimen showed a maximum bending strength of 750 MPa, higher than as-received specimen by approximately 40%. No stress induced transformation from tetragonal to monoclinic phase was observed near the surface of reduced 12Ce-TZP after bending test. A good correlation between bending strength and residual stress in tetragonal phase evaluated by X-ray stress measurement, was confirmed. A residual compressive stress of approximately 400 MPa was introduced in the surface of the most strengthened specimen. Partial reduction of 12Ce-TZP under selected conditions introduced residual compressive stress in a surface layer of the polycrystals and led to strengthening of the ceramic. In this work, the authors proposed a novel mechanism of "reduction-induced strengthening (RIS)" in CeO2 containing ceramics.