This paper presents the experimental investigation of the effect of Nb2O5 content on the phase composition, microstructure, and physical and mechanical performance of the zirconia-toughened alumina (ZTA) ceramics, aimed to optimize the additional amount of Nb2O5, refine the ceramic grains, and improve the densification, hardness and fracture toughness. ZTA ceramics with various Nb2O5 contents were prepared using the spark plasma sintering method. The addition of trace amounts of Nb2O5 did not produce a new Nb-rich phase; the Nb atoms were dissolved in the ZrO2 grains. The addition of trace amounts of Nb2O5 led to grain refinement and an increase in density, but the addition of excessive Nb2O5 resulted in grain growth and a decrease in relative density. Furthermore, the addition of Nb2O5 promoted uniformity of the microstructure. The sample with 0.25 wt.% Nb2O5 had the maximum Vickers hardness and indentation fracture toughness, which were 1228.40 HV and 9.17 MPa √m, respectively. Mechanical properties of the composite mainly depended on the grain size, which was influenced to some extent by the relative density.