Nanocrystalline alumina-zirconia-based eutectic ceramics fabricated with high-energy beams and composed of ultrafine, three-dimensionally entangled, single-crystal domains are a special category of eutectic oxides that exhibit exceptionally high-temperature mechanical properties, such as strength and toughness as well as creep resistance. This paper aims to provide a comprehensive review on the basic principles, advanced solidification processes, microstructure and mechanical properties of alumina-zirconia-based eutectic ceramics, with particular attention to the status of the art on a nanocrystalline scale. Some basic principles of coupled eutectic growth are first introduced based on previously reported models, followed by concise introduction of solidification techniques and the control strategy of solidification behavior from the processing variables. Then, the microstructural formation of nanoeutectic structure is elucidated with regard to different hierarchical scales, and mechanical properties such as hardness, flexural and tensile strength, fracture toughness and wear resistance are discussed in detail for a comparative study. Nanocrystalline alumina-zirconia-based eutectic ceramics with unique microstructural and compositional characteristics have been produced with high-energy beam-based processes, and in many cases, promising improvements in mechanical performance have been reported as contrasting with conventional eutectic ceramics.