Tetragonal zirconia polycrstals (TZP) with high strength and toughness offer the potential to compensate for manufacturing or application related defects. In this study aiming at ultimate toughness a co-stabilized TZP was manufactured by coating of monoclinic zirconia by a wet chemical process with 1.5 mol% ytterbia and 1.5 mol% praseodymia. The powder was hot-pressed at 1300-1400°C in 25°C increments for 1h by 60 MPa axial pressure.  The materials exhibit an ultrafine microstructure with grain sizes ranging from 130-200 nm. Mechanical properties were measured in a 3-point bending setup, the material shows a combination of moderate strength (600-950 MPa) and high toughness (11-12 MPa√m). Non-linear stress strain curves and occurrence of transformation bands prior to fracture indicate transformation induced failure behaviour. The transformation stress determined from the location of transformation bands in fractured samples increases with rising sintering temperature and is about 100-250 MPa lower than the bending strength.