A novel method for large-scale preparation of yttria-stabilized zirconia (YSZ) nanocrystals is presented. The hydrous YSZ colloidal nanoparticles are self-assembled on the surface of SrCO3 nanoparticles by a sonochemical method. After calcination, fully crystalline monodispersed YSZ nanoparticles are obtained, and the SrCO3 is washed out by 10% HNO3 solution. The agglomeration of YSZ particles is inhibited as the crystallization occurs on the surface and interface of SrCO3 nanoparticles. The nanocrystals are monodispersed with an average particle size of 4.7 nm and a high surface area of 165 m2/g. The quantum confinement effect is observed: the band gap increases from 4.13 eV for the agglomerated sample to 5.44 eV for the monodispersed YSZ nanocrystals.