In this work, we explore the high-temperature phase stability of isolated, alumina-coated zirconia nanocrystals with a goal of understanding how interfacial energy affects phase stability. Isolated tetragonal and hydrous amorphous zirconia colloids were synthesized and coated with alumina through the hydrolysis of aluminum isopropoxide. Alumina-coated samples exhibited phase behavior that was markedly different from that of the uncoated analogs. Uncoated tetragonal particles transformed to the monoclinic phase at 1100 °C while alumina-coated tetragonal particles did not transform until 1400 °C. Uncoated hydrous amorphous particles crystallized to the tetragonal phase after heating at 600 °C and transformed to the monoclinic phase after heating at 800 °C. Alumina-coated hydrous amorphous particles crystallized only after heating at 1050 °C, and transformed to the monoclinic phase after heating at 1400 °C. Differences in phase behavior are postulated to depend on the zirconia–alumina interface, which must be disrupted before zirconia particles can fuse and facilitate the tetragonal-to-monoclinic phase transition. By coating the nanocrystals with a thin alumina shell and studying the resultant phase stability, we explore the effect of reproducibly modified interfacial chemistry on phase behavior in nanoscale ceramic composites.