Molecular dynamics is employed to investigate the deformation and failure mechanisms of single and polycrystalline yttria-stabilized tetragonal zirconia (YSTZ) under uniaxial compression. Results show that the nanoscale plastic deformation of single crystal YSTZ has a strong dependence on the crystallographic orientation. A direct evidence of tetragonal to monoclinic transformation is observed when compress along , [101 ̅ ],  or [011 ̅ ] directions. While dislocation nucleation and emission is found to dominate the failure process of -, - and [1 ̅10]-oriented nanopillars. Interestingly, when applying loading on the -, -, - and -oriented nanopillars, a combination of dislocation motion and tetragonal to monoclinic transformation is detected. The dislocation-dominated deformation leads to the lowest strength for nanopillars, while phase transformation-dominated one results in the highest strength. In polycrystalline zirconia, phase transformation rather than dislocation motion is observed to be triggered at a lower stress and consequently dominate the plastic deformation.