Bi2O3is a promising sintering additive for YSZ that not only decreases its sintering temperature but also increases its ionic conductivity. However, Bi2O3preferably grows into large-sized rods. Moreover, the addition of Bi2O3induces phase instability of YSZ and the precipitation of monoclinic ZrO2, which is unfavorable for the electrical property. In order to precisely control the morphology and size of Bi2O3, a microemulsion method was introduced. Spherical Bi2O3nanoparticles were obtained from the formation of microemulsion bubbles at the water–oil interface due to the interaction between the two surfactants. Nanosized Bi2O3–YSZ composite powders with good mixing uniformity dramatically decreased the sintering temperature of YSZ to 1000 °C. Y2O3-stabilized Bi2O3(YSB)–YSZ composite powders were also fabricated, which did not affect the phase of YSZ but decreased its sintering temperature. Meanwhile, the oxygen vacancy concentration further increased to 64.9% of the total oxygen with the addition of 5 mol% YSB. In addition, its ionic conductivity reached 0.027 S·cm−1at 800 °C, one order of magnitude higher than that of YSZ. This work provides a new strategy to simultaneously decrease the sintering temperature, stabilize the phase and increase the conductivity of YSZ electrolytes.