Simulated zirconium oxide-based inert matrix fuel (IMF) has been prepared using cerium oxide replacing plutonium oxide, following the conventional pelletising route, in which an improved two-stage attrition mill was employed. Different methods have been applied for the powder preparation. In addition to powder mixing, nitrate solutions have been co-precipitated to bulk gel and to microspheres by the internal gelation process. The calcined porous microspheres were crushed in the attrition mill with a few passes. This co-precipitated powder was compared with three different mixtures of the four commercially available powders (ZrO2, Y2O3, Er2O3 and CeO2). Pellets of a standard size with relative densities higher than 90\% TD and comparable grain and pore structures have been obtained. Based on these simulation tests both processes are found suitable for fabricating IMF pellets, which fulfil requirements of a commercial plutonium and uranium mixed oxide (MOX), where applicable. No intensive milling is required to form a solid solution in the sintering step for a (Zr,Y,Er,Ce)O2−x pellet. For the fabrication of plutonium-containing IMF, a similar behaviour can be expected.