In this work the effect of transformation toughening induced by tetragonal ZrO2 particles embedded into the WC-Co(Ni) cermet was studied to evaluate the potential of the newly developed three phase composite as the wear resistant material. The present study relates to microstructural characterization of WC-ZrO2-Ni/Co hybrid materials. The addition of 6% of yttria stabilized zirconia results in WC grains refinement and increase in fracture toughness through realization of transformation of zirconia from tetragonal to monoclinic modification during crack propagation. The overall goal of the research is to find correlation between sintering parameters, materials microstructure, mechanical properties and wear performance. Wear mechanisms are influenced by several parameters of the tribological system e.g. loading conditions, environment, material composition, etc. In this work the main attention is paid to material composition and structural features. The trend to study the microstructural aspects in wear phenomena is combined with a holistic system approach focusing on microlevel response of the composites for an intelligent design of materials behaviour under dynamic loading.