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Zirconia (ZrO2) thin films were deposited on silicon using a zirconium cathodic arc plasma source in the presence of oxygen following by thermal treatment at various temperatures. The structure and phase composition of the zirconia films were investigated by X-ray diffraction (XRD), X-ray photoelectron spectroscopy (XPS), atomic force microscopy (AFM), scanning electron microscopy (SEM) and transmission electron microscopy (TEM). The bone bioactivity of the as-deposited and heat-treated ZrO2 films was evaluated by soaking them in simulated body fluids (SBF) for different time durations. The tetragonal phase predominates in the ZrO2 film and its surface microstructures strongly depend on the processing conditions such as substrate temperature during deposition, sample bias, and annealing temperature. The particle size which increases with higher annealing temperature is smaller than 100 nm in spite of annealing at 1000C for 2 hours. Bone-like apatite was found to form on the surface of the as-deposited ZrO2 film in our SBF immersion experiments, suggesting that the surface is bioactive. However, the bioactivity of the film deteriorated after thermal treatment suggesting that the bioactivity of the ZrO2 films depends on the particle size in the near surface. The nano-structured surface is believed to be the key factor to induce apatite precipitation on the ZrO2 film surface.