To further improve the mechanical performance and reduce the percolation threshold by controlling microstructures, Al2O3‐TiC composites containing 0‐20 vol% TiC were fabricated via in situ reaction synthesis. Graphite (ATC) and carbon nanotubes (ATCT) were used as carbon sources. The composites were also fabricated via a conventional process using a TiC starting powder (AT). X‐ray diffraction analysis and scanning electron microscopy observation results indicated successful fabrication of the composites with various microstructures. TiC particles in ATCT were completely dispersed at grain boundaries, whereas in ATC and AT, these particles were either intragranular or intergranular dispersed. The composites could be listed as follows, ATCT > ATC > AT, that is, in descending order of the reinforcing flexural strength and fracture toughness. The nanoindentation measurement indicated the optimum hardening effect of ATCT. The ATCT composite also exhibited the highest fracture toughness, which was 49% higher than that of the monolithic Al2O3. Crack deflection was considered as the main toughening mechanism while crack bridging behavior also occurred in ATCT. For a given TiC content, ATCT exhibited the lowest electrical resistivity, owing mainly to the complete grain‐boundary dispersion of the relatively large TiC particles. The similarity of the Al2O3 grain size and TiC particle size of ATCT contributed to the lowest percolation threshold achieved (11.2%), which (to date) is the lowest value that has been reported for the Al2O3‐TiC system.