In this study, the interactions between transformation toughening and plastic stretching were investigated experimentally. Zirconia and metals, nickel or silver, were incorporated simultaneously into an alumina matrix. The extent of phase transformation of zirconia particles was enhanced due to the coexistence of soft metals. The ductility of nickel was also enhanced in the Al2O3–Ni–ZrO2 composites. However, the presence of zirconia particles at the alumina/silver interface reduced the ability of silver to deform plastically. Due to the interactions, the ratio of composite toughness to matrix toughness for the Al2O3–Ni–ZrO2 composite was higher than the product of the ratio of the composites containing only nickel and only zirconia.