Dual phase magnesia-zirconia ceramics were developed, characterized, and evaluated as a potential matrix material for use in light water reactor inert matrix fuel intended for the disposition of plutonium and minor actinides. Ceramics were fabricated from the oxide mixture using conventional pressing and sintering techniques. Characterization of the final product was performed using optical microscopy, scanning electron microscopy, x-ray diffraction analysis, and energy-dispersive x-ray analysis. The final product was found to consist of two phases: cubic zirconia-based solid solution and cubic magnesia. Evaluation of key feasibility issues was limited to investigation of long-term stability in hydrothermal conditions and assessment of the thermal conductivity. With respect to hydrothermal stability, it was determined that limited degradation of these ceramics at 300^oC occurred due to the hydration of the magnesia phase. Normalized mass loss rate, used as a quantitative indicator of degradation, was found to decrease exponentially with the zirconia content in the ceramics. The normalized mass loss rates measured in static 300^oC de-ionized water for the magnesia-zirconia ceramics containing 40, 50, 60, and 70 weight percent of zirconia are 0.00688, 0.00256, 0.000595, 0.000131 g/cm2/hr respectively. Presence of boron in the water had a dramatic positive effect on the hydration resistance. At 300^oC the normalized mass loss rates for the composition containing 50 weight percent of zirconia was 0.00005667 g/cm2/hr in the 13000 ppm aqueous solution of the boric acid. With respect to thermal conductivity, the final product exhibits values of 5.5-9.5 W/(m deg) at 500^oC, and 4-6 W/(m deg) at 1200^oC depending on the composition. This claim is based on the assessment of thermal conductivity derived from thermal diffusivity measured by laser flash method in the temperature range from 200 to 1200^oC, measured density, and heat capacity calculated using rule of mixtures. Analytical estimates of the anticipated maximum temperature during normal reactor operation in a hypothetical inert matrix fuel rod based on the magnesia-zirconia ceramics yielded the values well below the melting temperature and well below current maximum temperatures authorized in light water reactors.