Neutron and X‐ray diffraction were used to investigate changes in the phase composition and lattice parameters with temperature and pressure of a 20‐wt% zirconia‐dispersed alumina composite. Neutron diffraction was used to determine the variation of tetragonal/monoclinic zirconia phase abundance for the bulk with stress. The bulk tetragonal/monoclinic ratio decreased by 40% for a stress of 550 MPa. A difference in the tetragonal/monoclinic ratio between the near‐surface and the bulk of the processed samples is believed to contribute to observed variations in nonuniform strain in the matrix, which has the effect of prestressing the sample. Placing a stress on the sample initially releases this prestressing.