Metal-ceramic microstructures were obtained by partial reduction of the spinel compound NiAl2O4. Electron microscopy studies were performed for microstructural characterization, phase identification and chemical analysis. Depending on the reduction temperature, two different morphologies of nearly pure Ni particles, equiaxed and rod-like, form within a ceramic matrix. The equiaxed Ni particles (0.02-0.5 mu m in diameter) are embedded in alpha-Al2O3, while the rod-like Ni particles (similar to 5 mu m in length and similar to 0.1 mu m in diameter) are in a metastable ''defect spinel'' containing much less Ni than NiAl2O4. The fracture toughness of the Ni-Al2O3 mixture was significantly improved with respect to that of the original spinel phase.