Nanocrystalline hydroxyapatite (HA) powders have been synthesized by precipitation using Ca(NO3)2.4H2O and (NH4)2 HPO4 at room temperature and atmospheric pressure. Nanocomposites of HA and partially stabilized zirconia (HA/PSZ) were sintered at atmospheric pressure and 1300℃ for 2h in air. The preparation techniques, structure and mechanical properties of these materials were characterized. The addition of nanosized PSZ reinforcing phase to HA may lead to an improvement of the macro and micro mechanical properties and not affect its biocompatibility and bioactivity. The bending strength, fracture toughness and nano-hardness were near to or greater than those for human cortical bone and human tooth (dentine and enamel). The composite was incubated in a fresh human plasma which confirmed the bioactivity of nanosized HA/PSZ materials. The bonding reaction between HA/PSZ ceramic and the plasma proteins was found, and hematopoietic cell phosphatase (HCP) layers formed on surface of each composite incubated in human plasma for two weeks.The diameter of a single HCP globule was less than 100 nm. Furthermore, the precipitating mechanism investigation was carried out through a comparative experiment in this paper.