Yttria stabilized tetragonal zirconia (Y0.08Zr0.94O2, YSZ) nanopowders were successfully synthesized by microwave solvothermal method (MSM). The synthesizing temperature, holding time and mineralizer concentration were optimized. The crystallization and particle distribution of as-prepared YSZ nanopowders were identified by DSC/TG, XRD, FESEM, TEM, FTIR, DLS, and BET. The dispersion of YSZ nanopowders dried by different methods and modified by polyethyleneimine (PEI) was analyzed and discussed. The results show that the PEI modified samples have the best dispersion, and the dispersion of freeze-dried samples is better than that of traditional dried ones. The particle size of the PEI modified samples calculated from the surface area determined by BET is 15.7 nm, which is consistent with that determined by TEM (16.5 nm), but slightly smaller than that calculated by the Scherrer formula according to XRD (22.3 nm). This may be attributed to the different testing principles in these methods.