Scandia, yttria doped zirconia ((ZrO2)0.96(REO1.5)0.04(RE=Sc3+, Y3+)) nanoparticles were prepared by the modified sol-gel method. The microstructure of the products was characterized by X-ray diffractometry (XRD), scanning electron microscopy (SEM), transmission electron microscopy (TEM) and Raman spectroscopy. Thermal stabillity of SYSZ nanocrystals were also investigated. The SYSZ nanocrystals synthesized with EGM:Zr+4mole ratio 4:1, calcined at 700°C, have average diameter of ~20 nm.