More than twenty years have passed since the Japanese government first undertook R&D on fine ceramics in its National R&D Program. Stimulated by such efforts, fine ceramics have exhibited rapid development and diffusion through substitution in a broad range of functional and structural materials fields, including the electronics, optical, mechanical, chemical and biomedical fields. However, although gross production of fine ceramics steadily increased from 1 trillion yen (7.8 US$) in 1988 to 1.5 trillion yen (15.6 billion US$) in 1995, the orbits of innovation for functional and structural materials demonstrate a clear contrast. Applications for fine ceramics as functional materials have shown remarkable development while applications for fine ceramics as structural materials have shown little or no sign of advancement. This contrast can be attributed to differences in the functionality of the two types of materials. Thus, functionality development for fine ceramics used as structural materials has become crucial in terms of survival strategy. This paper, by means of an empirical analysis of the development and diffusion orbit of innovation for fine ceramics in major use in Japan over the last two decades, attempts to identify factors contributing to the above contrast in functional and structural materials development.