Zirconia (ZrO2) and stainless steel 316 (SUS316) functionally graded materials (FGM) were fabricated by tape casting from an aqueous system. For the stable dispersion of ZrO2 and SUS316, we observed the zeta-potential (zeta) of each phase with pH variation and investigated the effect of organic additives on dispersion. Tetragonal zirconia polycrystals (TZP) and monoclinic zirconia polycrystals (MZP), which was used to control the shrinkage and sintering behaviors of TZP and SUS316, could be dispersed with addition of polymethacrylic acid (PMAA) as dispersant and SUS316 could be dispersed with carboxymethylcellulose sodium salt (Na-CMC) as suspending agent, Monophase and composite slurries were cast when the optimized conditions were established from the electrokinetic sonic amplitude (ESA) and viscosity data. ZrO2/SUS316 FGM was fabricated by sintering at 1350 degrees C in Ar/H-2 atmosphere. As a consequence, the microstructure and the interface of the FGM showed the continuous compositional gradient. It was verified that the sintering defects, such as delaminstion, cracking and warping, can be reduced or eliminated by the adjustment of the particle size and the phase-type of ZrO2. (C) 1998 Elsevier Science B.V. All rights reserved.