Homogeneous nanocrystalline (ZrO 2 ) 0.92 (RE 2 O 3 ) 0.08 (RE ~Y, Sc) with large specific surface areas and cubic structure were solvothermally synthesized from the urea coprecipitated (Zr,RE)-hydroxide gel or the gel-calcined oxide in water (or absolute ethanol) under mild conditions. Both the hydroxide and the oxide powders showed very high solvothermal reactivity. Mainly by X-ray diffraction and transmission electron microscopy, the solvothermal mechanism was explored. The heterogeneous nucleation-growth, i.e. an in situ transformation of hydrous (Zr,RE)-oxide with an ordered cubic structure via dissolution and recrystallization is supposed to predominately account for the nanocrystalline crystallization. The as-obtained nanocrystallite exhibited a good sinterability. Over the temperature range of 360-600 uC, nanocrystalline (ZrO 2 ) 0.92 (Y 2 O 3 ) 0.08 displayed enhanced specific grain boundary conductivity due to the size-dependent grain boundary impurity segregation.