The microstructural changes produced by large (38 to 53μm), single‐crystal ZrO2inclusions (0, 0.09, 0.30 volume fractions, based on solid volume) within an Al2O3powder matrix were detailed as a function of constrained densification. Composite powder compacts were produced by pressure filtration for conditions where the Al2O3slurry was either flocced or dispersed. For both conditions, the ZrO2inclusions constrained densification. Microstructural observations for all composites revealed (1) the presence of cracks with large opening displacements between inclusions and (2) large density variations within the matrix. The cracks were most frequent at high volume fraction of inclusions in composites produced from flocced slurries and apparently originated during specimen preparation. Their large opening displacment was a result of matrix densification. Fewer cracks were observed in composites produced from dispersed slurries. Instead, these microstructures were dominated by large variations in matrix density, viz., dense regions surrounding low‐density regions, not consitent with the initial packing density of the matrix powder. The denser regions were formed early in the densification schedule. The lower‐density regions eventually developed into regions containing large, elongated voids as the Al2O3matrix grains became larger with heat‐treatment time. This pore enlargement process was shown to result from the disappearance of necks between originally sintered grains and appeared similar to the thermodynamic instability observed in thin films and constraine