A combined sol–gel/thermal decomposition process has been used to produce powders of Y2O3-50 vol% MgO nanocomposites from four different precursor mixtures of acetate and/or nitrate salts. The influence of precursor chemistry on phase homogeneity in the ceramic materials produced from these powders has been investigated. Solutions of the precursor salts were mixed, dried to form a gel, and then calcined to give ceramic powders. The effects of precursor chemistry were investigated using a combination of thermal analysis, X-ray diffraction, scanning and transmission electron microscopy techniques. All of the calcined powders, and most of the consolidated materials produced from them, consist of nanosized grains of the cubic Y2O3 and MgO phases clustered into phase domains. For the materials synthesized from precursor mixtures containing only acetates or only nitrates, these grains and domains are rather coarse and are distributed rather inhomogeneously. Precursor mixtures containing an acetate and a nitrate, however, give materials with finer and more homogeneous phase domains. These phenomena are related to the thermal characteristics for the decomposition of the precursors and their effect on phase separation during oxide crystallization.